FX Concepts has taken a short position in AUD/USD with 7% of the firm’s capital and CEO John Taylor says the decline could just be getting started.
“As a chicken economist I can come out and say it will fall to 90-cents, but as a braver call I would say it ought to come down to 60-cents. I would look to hold on [to the trade] for a while,” he said in an interview with the Australian Financial Review.
The trade is hedged by long positions in the Canadian and New Zealand dollars. Taylor likes the kiwi’s exposure to food exports rather than boom/bust mining investment.
“We are seeing that already the kiwi is beating up on the Aussie. Its clear to us that Australia has the worst position because it’s very expensive. New Zealand is not too cheap, but its terms of trade looks a lot better and we don’t see as much risk because of the [food-based] type of its exports.”
If you want to take the other side of the AUD/USD trade, take solace in this. The article notes that Taylor’s fund is now down to $2.9 billion from a peak of $12 billion. That usually doesn’t happen when you’re always right.