Bears firm up bets on Asian currencies as US rate cuts remain elusive : Reuters poll By Reuters

Written by Sameer Manekar

(Reuters) – Analysts strengthened their bearish positions on most Asian currencies as higher long-term US interest rates and the dollar's resilience are likely to continue to hurt local units, a Reuters poll showed on Thursday.

A bi-monthly poll of 10 analysts showed that the Indonesian rupiah and Philippine peso were the most shorted currencies in the region, with bearish bets on both at multi-week highs.

The responses were received ahead of the May US inflation report, which showed prices remained steady, and the Federal Reserve's monetary policy meeting in which the central bank postponed the start of interest rate cuts to late December. However, investors in contracts tied to the Federal Reserve's benchmark interest rate maintained their bets with quarter-point cuts in September and December.

“We continue to see upside risks for the dollar index (DXY) given that we remain in an uncertain transition period on (US) inflation and markets may continue to be cautious,” analysts at Maybank said in a note on Thursday.

“The Fed staying higher for longer will also do the Asian currency market no favors, with dot charts now pointing to just one cut this year.”

The Indonesian rupiah, one of the region's worst-performing currencies so far this year, has seen analysts build their short bets throughout the year, as external factors and corporate profit outflows weigh on the currency.

“We are more skeptical towards the baht and rupee in the near term due to continued earnings outflows,” HSBC analysts said.

“As long as the Indonesian rupiah rate remains under pressure – which is very likely in the near term, given earnings outflows through the end of July, shrinking trade surplus, and lack of portfolio flows – we cannot rule out further interest rate hikes by BI (the Bank). Indonesia).”

Short bets on the Philippine peso rose as the local central bank remained of the view that interest rates could be cut as early as August despite rising inflation.

“A signal of a rate cut ahead of the Fed is likely to increase PHP depreciation pressure,” HSBC analysts said.

Meanwhile, analysts turned bearish on the Indian rupee, one of the region's best-performing currencies so far this year, as external factors such as rising interest rates and geopolitical tensions in the Middle East put pressure on the currency.

Bearish views also rose on the South Korean won, Taiwan dollar and Singapore dollar, while marginally lower on the Chinese yuan and Thai baht.

The Asian Currency Positions Survey focuses on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, the South Korean won, the Singapore dollar, the Indonesian rupiah, the Taiwanese dollar, the Indian rupee, the Philippine peso, and the Malaysian ringgit. And the Thai baht.

The survey uses estimates of net long or short positions on a scale from minus 3 to plus 3. A score of plus 3 indicates that the market is significantly buying the US dollar.

The figures include positions held through non-deliverable futures contracts (NDFs).

The survey results are shown below (positions in USD for each currency):

date

13 Jun 24 0.95 0.87 0.62 1.22 0.64 0.37 1.00 1.23 0.92

May 30, 2024 1.05 0.72 0.33 0.94 0.53 0.00 0.81 1.19 1.00

16 May 24 1.05 0.96 0.35 0.96 1.02 0.39 1.23 1.29 1.00

2-May-24 1.25 1.61 0.89 1.39 1.40 0.49 1.46 1.44 1.39

18-Apr-24 1.25 1.59 0.80 1.32 1.24 0.43 1.42 1.19 1.28

4-Apr-24 1.18 1.09 0.42 1.13 1.17 0.00 1.15 0.62 1.35

March 21, 2024 0.92 0.82 0.33 0.60 0.92 -0.54 1.12 0.47 1.13

March 7, 2024 0.84 0.54 0.25 0.53 0.64 -0.59 1.14 0.52 1.05

22 Feb 24 0.70 0.40 0.20 0.20 0.70 -0.40 1.30 0.30 1.10

8 Feb 24 0.40 0.39 0.41 0.40 0.32 -0.17 1.07 0.28 0.72