Bolt from the blue RBA hike would send AUD skywards
May 2 (Reuters) -The Australian dollar should soar if the Reserve Bank of Australia springs a huge shock and raises interest rates as early as next week, with scope for AUD/USD to rise to 0.67.
No rate change is expected from the RBA on May 7, although Capital Economics predicts a 25 basis point increase to 4.60%.
The AUD could also gain if the RBA delivers a more hawkish than expected hold next week which ups the probability of higher rates ahead. Rabobank expects the RBA to raise rates in August, and again in November.
A rate increase Down Under would contrast with the Federal Reserve outlook; on Wednesday, Jerome Powell said it was unlikely the Fed's next rate move would be a hike.
CFTC data on FX positioning showed the net AUD short totalled a hefty 96,239 contracts in the week ended April 23 - only 10% below its all-time high in March. Those shorts are set to be squeezed if the RBA raises rates next week or delivers an ultra-hawkish hold.
AUD/USD was last at 0.67 in mid-January.
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Robert Howard is a Reuters market analyst. The views expressed are his own. Editing by Alison Williams
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