Leveraged fund managers have increased their bullish bets on the Australian dollar to the highest level in more than eight years. For the week ending February 3, net long positions held by hedge funds and other large speculators rose by 43% to 57,115 contracts. According to data from the U.S. Commodity Futures Trading Commission, this marks the highest level since late 2017. The increase in long positions highlights growing market confidence in the Australian dollar, driven by views that its relatively high yield and expectations that the Reserve Bank of Australia will maintain elevated interest rates for an extended period will support the currency. Investors are attracted by the yield advantage of the Australian dollar, with swap markets now almost fully pricing in another rate hike in June. Analysts, including JPMorgan strategist Ben Jarman, noted in a report, "The Australian dollar is uniquely positioned within a hiking cycle." The bank raised its near-term target for the AUD/USD pair from 68 cents to 73 cents, citing catalysts such as "changes in foreign exchange hedging behavior and net portfolio flows supported by strong fiscal indicators." The Reserve Bank of Australia raised its key interest rate last Tuesday, becoming the first major central bank to hike rates this year. The central bank judged that persistent domestic inflationary pressures warranted renewed policy tightening. According to its statement, the RBA's Monetary Policy Board increased the cash rate from 3.6% to 3.85%. In its first meeting of 2026, the nine-member board unanimously decided to tighten policy. In its quarterly Statement on Monetary Policy, the RBA raised its inflation, economic growth, and employment forecasts for this year, even while assuming two additional rate hikes in 2026. The trimmed mean inflation measure, which excludes volatile items, is now projected to remain above the 2%–3% target band this year and is not expected to return to the midpoint of the target range until the end of 2027.