Bears on Asian Currencies Pull Back as Inflation Outlook Brightens

 

The biweekly survey of 12 analysts found that short holdings on all developing Asian currencies decreased, with bets on the Chinese yuan at their lowest level since late April.

Put options on the Singapore dollar, the Indonesian rupiah, and the Philippine peso all hit multi-month lows.

Even though prices have been steadily going up, the news that they remained steady in the United States in July was a welcome comfort and contributed to the uptick in optimism.

After the Bank of Thailand (BoT) increased its interest rate by 25 basis points on Wednesday, bringing it in line with regional peers and kicking off its tightening cycle, short bets on the Thai baht fell to their lowest level since early June.

Tourists' returns have helped revive Thailand's economy, which in turn has given the Bank of Thailand (BoT) some room to adjust interest rates.

The BoT is largely anticipated to maintain its policy of gradual normalization for the remainder of 2018.

The baht's over 4% gain since the beginning of the month makes it one of the least shorted currencies in the survey.

During the first seven months of this year, the value of the currency dropped by 10.2 percent.

The survey saw a spike in participation after the Thai central bank announced the rate hike.

While Indonesia's economy is on the mend, increasing inflation and global recession fears have prompted calls for Bank Indonesia (BI) to raise interest rates. The Indonesian rupiah is among the least shorted currencies.

Indonesia, the largest economy in Southeast Asia, is one of the few countries in the region to hold on to its loose monetary policy from the epidemic era.

Both Citi and OCBC forecast that BI will boost its benchmark seven-day reverse repurchase rate at a meeting later this month, with Citi predicting a 25 basis point increase.

Maybank and ANZ, on the other hand, do not expect the central bank to rush to tighten.

Margin calls on the Indian rupee, the South Korean won, and the Taiwan dollar all hit their lowest point since April 21.

Nine Asian emerging market currencies (the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit, and Thai baht) are the focus of the Asian currency positioning poll, which asks analysts and fund managers about their views on the market.

The net long and short positions are estimated on a -3 to +3 scale in the survey. Having a plus-3 score means the market is extremely long on the dollar.

This data includes open positions in non-deliverable futures (NDFs)