By Roushni Nair
(Reuters) – Bearish bets on most Asian currencies were raised, a Reuters poll found on Thursday, as the possibility of higher-for-longer U.S. interest rates and the unprecedented surge in oil prices triggered a move away from riskier assets and towards the safety of the greenback.
Short positions on the Singapore dollar firmed to their highest since Oct. 2022, while those on the Indonesian rupiah, the best performer among its regional peers, touched their highest since December. Bearish bets on Thailand’s baht were at over a three-month high, according to a fortnightly poll of 11 respondents.
Investor confidence in the baht has taken a hit as concerns that higher spending by the country’s new government in light of proposed stimulus measures will lead to fiscal damage and increased debt burden for years to come.
“The baht is facing increased selling pressure as a lot of investors are quite concerned about uncertainty around fiscal stability as the new government plans to issue massive fiscal stimulus, indicating huge borrowings and increased debt,” Poon Panichpibool, markets strategist with Krung Thai Bank told Reuters.
Panichpibool projected that a gradual strengthening in the baht will take effect in the fourth quarter of this year or in early 2024, on expectations that more foreign tourists will visit the country. The currency is on track to log losses for a fifth straight week, having lost over 1% in value this week so far.
He, however, reiterated that risks to the forecast include political instability and fiscal damage.
The U.S. dollar, on the other hand, has hit new highs in the last two weeks and is currently trading nearly 3.5% higher this year against a basket of currencies, as hawkish rhetoric by the Fed and signs of resilience in the world’s largest economy have raised expectations that rates in the U.S. may rise further. [USD/]
However, foreign exchange strategists are sticking with their forecasts for a weaker dollar despite having been wrong-footed for years in predicting a downturn in the greenback, the latest Reuters poll showed.
Emerging Asian currencies are expected to gradually recover and stabilize in the fourth quarter, when renewed strength in the dollar fades away, with investors buying into the local units, Panichpibool added.
Bearish bets on the Philippines peso firmed to their highest in nearly two months, while short bets on the Malaysian ringgit touched their highest in slightly over a month.
The Indian rupee and the Chinese yuan were the only currencies on which bearish bets eased.
The rupee, which has been at risk of slipping to a record low against the dollar, is projected to trade in a tight range over the coming months as the Reserve Bank of India continues to intervene in the market to shield the currency, according to a Reuters poll.
The recent surge in oil prices directly affects net-importing economies like Thailand and India, adding to inflationary woes and a possible increase in current account deficits. [O/R]
Taiwanese dollar and the South Korean won were the most-shorted currencies in the poll.
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
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
13-Jul-23 1.33 0.12 0.62 0.52 1.13 0.10 1.77 0.26 0.73
29-Jun-23 1.74 0.29 0.50 0.30 0.72 -0.14 1.85 0.29 1.03
15-Jun-23 1.59 -0.03 0.17 -0.33 0.68 -0.24 1.64 0.74 0.25
01-Jun-23 1.88 0.68 0.73 0.23 0.70 0.48 1.77 1.08 0.45
(Reporting by Roushni Nair in Bengaluru, additional reporting by Sameer Manekar; Editing by Varun H K)
