By Roushni Nair
Investors turned bullish on most emerging Asian currencies, as prospects of a potential end to U.S. interest rate hikes led to weakness in the greenback and triggered a rush into riskier assets in the region, a Reuters poll showed on Thursday.
Bullish bets on South Korean won, Taiwanese dollar, and Philippine peso were at their highest since Feb. 9, while long positions on the Singapore dollar and Indonesian rupiah stood at a four month high, the fortnightly survey of 12 respondents showed.
Market participants are betting on prolonged weakness in the U.S. dollar, taking cues from a spate of economic data that reinforced optimism that the U.S. Federal Reserve is probably done raising interest rates this cycle, with markets even anticipating a cut in mid-2024.
The dollar index, which measures the U.S. currency against six rivals, has lost nearly 0.6% so far in November, helping emerging Asian currencies recover some ground.
Poon Panichpibool, a markets strategist with Krung Thai Bank, however, said there is still a possibility of a rebound in the dollar depending on risk of data in the U.S. coming in stronger than expected.
"The dollar could edge higher in the third and fourth quarter of 2024, when markets would start pricing in political risks arising from a presidential election in the U.S., though, dollar weakness could prolong until the third quarter of 2024," Panichpibool said.
Back in Asia, the Taiwan dollar has strengthened over 3.5% so far in November, snapping a seven-month losing streak. The unit is set log its best month in a year.
Increased political uncertainty in Taiwan has led to volatility in the local currency, with two main opposition parties naming their vice presidential candidates after talks about running a joint ticket to take on the ruling party failed.
The Korean won, too, has performed considerably well, adding over 4% in value. The unit is set log its best month since last November.
Investors, however, remained bearish for the Indian rupee, Chinese yuan, and the Malaysian ringgit despite an improvement in sentiment.
"I think people, including myself, are not confident about the economical recovery in China, though I still make a call that China's economy has already passed the worst point but remains full of uncertainty going forward," Panichpibool said.
Investors were most bearish on the Malaysian ringgit among the pack. Confidence in the local unit has faltered lately, amid lingering uncertainty around demand for palm oil and other commodities.
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
30-Nov-23 0.12 -0.05 -0.07 -0.05 -0.13 0.63 0.73 -0.10 -0.1
16-Nov-23 0.77 0.49 0.38 0.77 0.63 0.82 1.14 0.38 0.28
02-Nov-23 1.32 1.18 0.74 1.44 1.31 1.35 1.33 0.96 0.85
19-Oct-23 1.02 1.16 0.84 1.06 1.06 1.21 0.78 0.89 0.67
5-Oct-23 1.17 1.25 0.81 1.00 1.25 0.92 1.08 0.75 1.03
21-Sep-23 1.29 0.94 0.61 0.84 0.98 1.00 1.03 0.64 0.83
7-Sep-23 1.28 1.01 0.30 0.65 0.95 0.79 0.86 0.55 0.57
24-Aug-23 1.42 0.79 0.34 0.77 1.00 0.84 1.18 0.92 0.50
10-Aug-23 0.74 0.68 0.28 0.60 1.12 0.62 0.98 0.75 0.49
27-Jul-23 0.77 0.19 -0.22 -0.14 1.17 -0.06 1.15 0.14 0.15
(Reporting by Roushni Nair in Bengaluru; Editing by Varun H K)