Investors turn more bearish on Asian FX amid return of King Dollar: Reuters Poll

By Harshita Swaminathan

(Reuters) – Investors turned even more bearish on Asian currencies after China’s tepid growth target and the U.S dollar’s renewed strength after the Federal Reserve chair warned of higher and faster interest rates.

Bearish bets intensified on nearly all Asian currencies, with short bets on the South Korean won and the Chinese yuan reaching their highest since November, according to a fortnightly poll of 12 analysts.

About half of the poll responses were collected before Fed Chair Jerome Powell’s hawkish comments earlier this week that had markets pricing in a 50 basis points (bps) rate hike at the central bank’s meeting later this month.

This comes after weeks of broad consensus that 25 bps hikes would be the way forward.

The comments also led to the dollar index, which measures the currency against six peers, hitting a three-month high.

The risk sentiment in the market at this point is skewed to the downside, said analysts at Maybank, as the dollar, through the week, appeared to be supported by expectations of a hawkish Fed and weak China stimulus.

Short bets on the won were the highest among Asian currencies for the second week in a row. The won is more susceptible to the dollar’s moves than its Asian peers, underpinned by its tech exports-reliant economy.

China dampened investor sentiment further, setting its annual growth target at 5%, below last year’s 5.5% and undershooting market expectations of about 6%.

However, the Indian rupee, already the best performing currency in Asia so far this year, bucked the bearish trend as investors dialled back their short bets.

This could partly be due to positive seasonality for the country’s trade balance and current account into the fiscal year end, said Michael Loh, an analyst at BNP Paribas.

Malaysia’s central bank is widely expected to maintain interest rates for its second consecutive meeting, on Thursday. Short bets on the ringgit rose slightly.

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/ USD/ USD/ USD/ USD/ USD/I USD/M USD/ USD/

cny krw sgd idr twd nr yr php thb

09-Mar 0.68 1.3 0.65 0.56 0.78 0.28 0.78 0.42 0.3

-23

23-Feb 0.36 0.77 0.21 0.12 0.30 0.80 0.49 0.33 0.37

-23

09-Feb -0.8 -0.6 -0.7 -0.5 -0.6 0.25 -0.64 -0.4 -1.0

-23 0 3 2 3 8 0 0

26-Jan -1.2 -1.1 -1.4 -1.1 -0.6 -0.47 -1.25 -0.7 -1.7

-23 9 4 0 5 8 8 7

12-Jan -1.5 -1.3 -1.3 -0.1 -0.6 0.07 -0.82 -0.6 -1.8

-23 8 9 1 0 7 1 5

15-Dec 0.08 -0.5 -0.8 0.92 -0.2 0.63 -0.36 -0.1 -0.6

-22 5 5 2 5 9

1-Dec- 0.63 -0.1 -0.3 1.08 0.15 0.76 -0.02 0.33 -0.1

22 5 6

17-Nov 0.74 0.21 -0.0 1.06 0.84 1.13 1.18 0.89 0.4

-22 6

03-Nov 1.81 1.38 0.47 1.57 1.81 1.47 2.02 1.36 1.34

-22

20-Oct 1.96 2.02 1.13 1.83 1.98 1.60 2.33 1.94 2.00

-22

(Reporting by Harshita Swaminathan; Editing by Sonia Cheema)