Hedge Funds Favour Aussie Over Kiwi as RBA Rate Hike Looms

Hedge funds are placing bets on the Australian dollar outperforming its New Zealand counterpart as the Reserve Bank of Australia (RBA) prepares to raise interest rates. The decision by investors is based on expectations that further tightening will boost the Aussie currency.

Australia's inflation data released earlier in August showed hotter-than-expected numbers, which revived speculation about more rate hikes and sent the Australian dollar surging against its New Zealand counterpart for the first time since March 11. The surge in options trading on the AUD/NZD pair has reached a record high this year, with call volumes outnumbering puts three to one, according to Depository Trust & Clearing Corp data.

The market is also being influenced by the upcoming New Zealand election, which may impact the nation's monetary policy outlook. The uncertainty surrounding the outcome of the election is contributing to the increased volatility in the kiwi currency.