Hedge Funds Boost Short Positions on New Zealand Dollar to a 20-Year High

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Hedge funds have increased their net short positions on the New Zealand dollar to the highest level since records began in 2006, even as the currency strengthened after the Reserve Bank of New Zealand signaled a rate hike. Data from the CFTC shows that in the week ending July 14, leveraged funds added another 1,907 contracts to their net short position, bringing the total to 29,582 contracts, the highest since 2006. Meanwhile, asset managers remain the most bearish on the kiwi since December. Investors are concerned that crude oil prices climbing back above 90 dollars a barrel amid US-Iran tensions will further strain New Zealand's economy, which relies almost entirely on oil imports. Andrew Ticehurst, a strategist at Nomura, noted that New Zealand's economy likely stagnated in the second quarter and higher oil prices are an additional negative factor, but he admitted that the buildup of short positions at such elevated levels is surprising because investors were expected to start covering shorts after the central bank confirmed a rate hike. The New Zealand dollar recently edged up to 58.54 US cents.