FOREX-Hedge funds trim risky FX trades as rate-cut bets rise

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, June 14 (Reuters) - The Australian and the New
Zealand dollars fell on Friday as bets on interest rate cuts
undermined demand as a Group of 20 meeting later this month kept
investors sidelined.
The Aussie AUD=D3 fell 0.24% to $0.6892 and was down 1.5%
for the week, the biggest decline since mid-May. The Kiwi dollar
NZD=D3 dropped 0.4% to $0.6529, down 2% for the week.
Bond futures RBAWATCH imply a 66% probability the Reserve
Bank of Australia will follow up its recent quarter-point easing
with another in July. If not, a reduction to 1% is considered
certain by August 0#YIB: .
Markets were also raising bets of a rate cut by the Reserve
Bank of New Zealand.
"Rising interest rate cut expectations thanks to weak data
has fuelled weakness in the Australian dollar with trade
tensions also weighing on demand," said Manuel Oliveri, an FX
strategist at Credit Agricole in London.
The weakness in the Australian dollar has pushed investors
to unwind some of their carry trades, where speculators borrow
in a low-yielding currency such as the Swiss franc and invest in
relatively higher-yielding ones such as the Australian dollars.
The Australian dollar/Swiss franc cross, a barometer for
such speculative bets, has fallen nearly 6% in eight weeks,
indicating hedge funds were losing money on such bets.
Elsewhere, the U.S. dollar gained on Friday and was on track
for its biggest weekly rise in three weeks, before U.S. retail
sales data. Sales growth was to reach 0.3% in May compared with
0.1% in April.
With investors betting on U.S. rate cuts in the coming
weeks, investors are worried that stronger sales might undermine
some of those bets and push the dollar higher.
Bond markets are pricing in a 28% chance of a rate cut next
week, followed by a sure bet at the end of July.
Against a basket of its rivals .DXY , the dollar rose 0.1%
to a one-week high of 97.09.