© Reuters. FILE PHOTO: Chinese 100-yuan banknotes are seen on the counter of a branch of a commercial bank in Beijing, China, March 30, 2016. (Reuters) / Kim Kyung Hoon/File Photo/File Photo
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Written by Samir Manikar
(Reuters) – Investors trimmed their short bets on emerging Asian currencies, a Reuters poll showed on Thursday, as most local central banks maintained their stance on interest rates, but remained in bearish territory for the Malaysian ringgit and the Chinese yuan.
Since all 10 responses to the survey were received before the US Federal Reserve meeting on Wednesday, they do not take into account its position that it may need to increase rates by up to half a percentage point by the end of the year.
Analysts expect that further interest rate hikes could support the dollar for a longer period, which could affect risk-sensitive Asian assets.
“It is … puzzling as to why the Fed is holding out but looking to raise it aggressively again later rather than just making the moves yesterday,” Maybank analysts wrote in a note.
“Such mixed messages are likely to support maintaining range trading in the near term near 103.00-104.00 given that it remains unclear how the Fed rate path will evolve.”
The biweekly survey showed that short bets on most Asian currencies eased slightly, with bets on the Philippine peso dropping to a two-month low, while investors turned bullish on the Indonesian rupee and Indian rupee.
Investors were more bearish on the Malaysian ringgit among the pack, but they have softened their positions slightly from a seven-month high. Bets on the yuan eased, but it remained at its highest level since early November.
China, Southeast Asia’s largest trading partner and global manufacturing powerhouse, has had a tough time getting back on its feet since reopening from COVID-19 lockdowns late last year, which markets didn’t initially expect but is now priced into.
Vishnu Varathan, head of economics and strategy at Mizuho Bank, said that while China’s central bank announced some stimulus measures this week, it failed to impress markets as it failed to improve an “annoying confidence deficit”.
“Any current optimism about China is counterproductive to expecting more and more sure stimulus to make up for the lack of stimulus efforts thus far.”
Analysts at Maybank expect the yuan to weaken further due to continued economic weakness and the prospect of further easing by the central bank.
Among other currencies, short bets on the Singapore dollar fell to a one-month low, while bets on the Thai baht and Taiwanese dollar improved marginally.
Meanwhile, investors were barely getting past the South Korean won, turning bullish for the first time since early February.
The Asian Currency Positioning survey focuses on what analysts and fund managers think about the current market positions in nine emerging Asian 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 one. Ringgit and Thai baht.
The survey uses estimates of net long and short positions on a scale of 3 to plus 3. A score of plus 3 indicates that the market is significantly long on the US dollar.
The numbers include positions held by non-deliverable attackers (NDFs).
Survey results are provided below (positions are in US dollars against each currency):
date
15-Jun -23 1.59 -0.03 0.17 -0.33 0.68 -0.24 1.64 0.74 0.25
Jun 1 -23 1.88 0.68 0.73 0.23 0.7 0.48 1.77 1.08 0.45
May 18-23 1.27 0.88 0.19 -0.27 1 0.11 1.1 1.12 -0.5
May 04 -23 0.56 1.01 -0.04 -1.05 0.65 -0.14 0.69 0.86 -0.43
20 – Apr – 23 – 0.14 0.36 – 0.13 – 0.47 0.3 0.3 0.54 0.95 – 0.12
06-Apr -23 0.04 0.56 -0.39 -0.26 -0.03 0.3 0.29 0.08 -0.06
March 23 – March 23 0.17 0.87 0.16 0.74 0.63 0.58 0.74 0.36 0.37
09 Mar – 23 0.68 1.3 0.65 0.56 0.78 0.28 0.78 0.42 0.3
23 Feb – 23 Feb 0.36 0.77 0.21 0.12 0.3 0.8 0.49 0.33 0.37