Asian FX bears prevail as US rate cut bets weaken, China woes bite

By Roushni Nair

Feb 22 (Reuters) –Bearish bets prevail across most Asian currencies, with the Indian rupee standing as the sole outlier, due to uncertainties around U.S. monetary policy easing and a slower-than-expected economic recovery in China, Southeast Asia’s largest trading partner.

Short bets on the Chinese yuan CNY=CFXS and the South Korean won KRW=KFTC increased to their highest level since Nov. 16, while those on the Singapore dollar SGD= and the Philippine peso PHP=PH rose to nearly a 1-month high, according to a fortnightly poll of 15 respondents.

Bucking the sombre mood, bullish bets on the Indian rupee INR= increased to their highest level in over a year as market participants increasingly rely on the country’s promising economic prospects and recent upside in equities.

“Markets have returned to a long Indian rupee as confidence in the country’s economy and an eventful rally in Indian equities so far this year has translated into upside for the rupee,” Poon Panichpibool, a markets strategist with Krung Thai Bank told Reuters. “However, I would advise caution around the upcoming political elections.”

Meanwhile, the increasing prospects of U.S. interest rates staying higher for longer, after investors dialed back expectations of monetary policy easing, led to a recent rebound in the greenback.

The minutes of the U.S. Federal Reserve’s latest policy meeting released on Wednesday reinforced the message that the central bank is in no hurry to deliver on rate cuts, which officials still expect to begin sometime this year.

The U.S. dollar index =USD, which measures itself against a basket of currencies, has appreciated over 2% so far into 2024, underscoring expectations of a prolonged weakness in risk-heavy Asian currencies.

Back in Thailand, short bets on the baht THB=TH rose to their highest level since late November 2022.

Confidence in the baht has been waning after the country’s Prime Minister Srettha Thavisin, who has been at loggerheads with the central bank over the direction of monetary policy, suggested that the current level of interest rates could exacerbate stubbornly high household debt levels.

Short bets on the Malaysian ringgit MYR= increased to their highest since November. The ringgit is trading at lows not seen since the Asian Financial Crisis, with mounting pressure from outflows, foreign currency hoarding and a strong dollar.

Meanwhile, a series of disappointing economic data from China, coupled with equity market volatility, has reinforced analysts’ bearish views on the yuan.

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 ASIAPOSN are provided below (positions in U.S. dollar versus each currency):

Reporting by Roushni Nair in Bengaluru; Editing by Dhanya Ann Thoppil

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