Bearish bets on Asian FX ease as central banks tilt towards rate hikes – Reuters poll

By Sameer Manekar

(Reuters) – Bearish bets on most Asian currencies eased as regional central banks sought to normalise policy due to surging inflation, while investors turned bullish on Singapore dollar for the first time in over a month, a Reuters poll found on Thursday.

Long positions on the Chinese yuan firmed despite increasing vulnerability from COVID-19 lockdowns, divergence in global and domestic monetary policy cycle, narrowing yield differentials, and headwinds from the Russia-Ukraine conflict.

Maybank analysts say strong fundamentals — a solid trade surplus, potential for more monetary accommodation and capacity to boost infrastructure investment to support growth has investors still betting long on the yuan.

Traders polled by Reuters have been consistently bullish on the yuan since late October last year, while some analysts expect the currency, which has depreciated 0.8% since March, to remain within a 6.35 and 6.40 per dollar range in the near term.

Elsewhere, bets turned bullish on the Singapore dollar for the first time since late February, while bearish positions on the Indian rupee, Philippine peso and the Thai baht eased marginally, a fortnightly poll of 14 respondents found.

“In Emerging Asia, the tide of improving economic conditions and rising inflationary pressures continues to tilt more central banks towards monetary policy normalisation,” Barclays analysts said, expecting the Malaysian central bank to begin hiking rates soon.

The Philippine peso, which has appreciated nearly 2% since mid-March, has seen the sharpest drop in its bearish bets as the central bank looked ready to take pre-emptive action to combat rising inflation.

Short bets on the Indian rupee were at its lowest since Feb. 24. The Reserve Bank of India (RBI) on Friday is expected to hold its key interest rates, a separate poll by Reuters showed, even as inflation held above the central bank’s upper end of the forecast range.

The Indian central bank is seen holding until at least August to hike rates, in line with regional peers but placing it well behind major central banks like the U.S. Federal Reserve and the Bank of England in tackling inflation.

In Singapore, the central bank is likely to tighten its policy setting next week – the third time in a row – to tackle inflationary pressures.

Elsewhere, bets on the Indonesian rupiah turned marginally long for the first time since late February, while short position on the Malaysian ringgit solidified to its highest since mid-December on weak growth outlook.

The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long U.S. dollars.

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

The survey findings are provided below (positions in U.S. dollar versus each currency):

DATE USD/CNY USD/KRW USD/SGD USD/IDR USD/TWD USD/INR USD/MYR USD/PHP USD/THB

07-Apr-22 -0.41 0.99 -0.46 -0.05 0.81 0.63 0.32 0.53 0.31

24-Mar-22 -0.16 0.98 0.19 0.04 1.16 0.99 0.12 1.4 0.46

09-Mar-22 -0.85 1.22 0.8 0.49 0.97 1.1 0.05 0.89 -0.08

24-Feb-22 -0.99 0.39 -0.77 -0.01 0.33 0.07 0.2 0.19 -1.07

10-Feb-22 -0.99 0.85 -0.98 0.46 -0.18 0.32 0.1 0.74 -0.31

27-Jan-22 -1.29 0.89 -0.67 0.12 -0.17 0.18 0.25 0.82 0

13-Jan-22 -0.73 0.97 0.22 0.2 -0.15 -0.29 0.28 0.71 0.61

16-Dec-21 -1.07 0.53 0.67 0.54 0.09 1.07 0.84 0.2 0.36

02-Dec-21 -0.88 1.06 0.58 0.15 0 0.47 0.28 0.26 0.71

18-Nov-21 -0.87 0.48 0.07 -0.72 -0.15 0.08 -0.04 0.24 0.12

(Reporting by Sameer Manekar in Bengaluru; editing by Uttaresh.V)