The Mexican peso, one of the only currencies that stood a chance against the mighty US dollar, has not had much luck lately.  The Mexican Peso has declined 3.6 percent against USD in this month, after detracting to 0.0791 against the USD today. When all other major currencies, EUR, CAD, AUD, JPY, GBP, and even CPH look weak against the US dollar, hedge funds took to betting their longs in favor of the Mexican peso.

Mexican peso

Mexican Peso Down 2.2% YTD, Aussie Dollar -7.26%

BAML expects USD to strengthen to MXN13 from MXN12.68, WSJ’s Katie Martin reports. The currency is still up 2.2 percent against USD for the year, however if USD keeps up its vigor, MXN and its bullish holders may face trouble. According to CFTC data, hedge funds have the highest number of longs in MXN futures on Comex exchange. As of May 21, the total long contracts in MXN futures and options initiated by hedge funds were up to 126,329 positions, an unprecedented weight of longs that is not seen in any other currency. Hedge funds have pulled back from their 143,812 long positions in peso since the beginning of April.

While bets on peso may be hurting hedge funds, shorts in Australian dollar are becoming sweeter for these managers. Since our last update on AUD positions, the currency has declined painfully lower. The month to date decline is now -6.97 percent and this makes up the bulk of the year to date losses of AUD. The dark cloud on AUD is so thick these days, that the only other currency which has detracted as terribly is Syrian pound according to Enda Curran of WSJ. Meanwhile, on the week ending on May 21, hedge fund longs in AUD were decreased by 16 percent whereas shorts in AUD futures and options were increased to 71,345 positions.

See Shorts In AUD Reach New Highs, Hedge Funds ‘Join’ Soros

Hedge Funds Betting Against AUD, In Favor Of MXN

Those with short bets in AUD are reaping huge profits here. Other than George Soros and Stanley Druckenmiller, back in February Ray Dalio was also known to be bearish on Aussie currency, when he disclosed the yen short . Omni Macro has a long held short in AUD which has consistently performed well for the fund. Argonaut Capital, up 4.3 percent through March, has been bearish on Australian currency as well and was also betting on lower yields in its Q1 review.

The  hedge funds who are known to be bullish on Mexican peso are Ray Dalio’s Bridgewater Associates, Pharo Macro Fund and Woodbine Capital. Pharo Macro is up 9 percent to May 10 YTD.  Woodbine Capital, up 7.3 percent to April, has detailed its long thesis on MXN, which is based on Mexico’s economic reforms and its attraction as an emerging economy. Fortress Macro Fund was long MXN last year. Another hedge fund, C12 Capital Management has alternatively bet on the long and short side of MXN against USD throughout the year.