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Aussie Dollar Falls, Investors Not Discouraged

The Australian dollar fell against the U.S. dollar in March, but hedge funds remain bullish on the declining currency.

The currency fell 1.4% in March and performed its worst in five months against the U.S. dollar. However, the economy exceeding expectations indicates that the Aussie dollar could rebound.

Bulls overlook the currency’s weakness in favor of their forecasts that the currency will strengthen. By the end of March, investors had increased their net long Aussie positions to the highest since last November according to Commodity Futures Trading Commission data.

Promising Forecasts

Commonwealth Bank of Australia strategists forecast that the currency “can appreciate further because it is undervalued relative to its fundamentals.” The group also forecasts an increase in commodity prices for 2021.

They also wrote that a possible reduction in Chinese steel production and carbon border fees could affect the currency’s expected rise. Despite the risks, they still see the currency rising against the dollar in the next months and even expect an $0.80 rise by June.

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