A Reuters poll on Thursday showed bearish bets on nearly all Asian currencies rose to multi-year highs, as fears of an impending recession from a rapid rise in interest rates to rein in high inflation dampened sentiment.
Short positions on the Thai baht, the Philippine peso and the Singapore dollar have been at their highest since 2018, when data was first available, according to a fortnightly survey of 13 participants.
Analysts on average have not held net long positions on any Asian currency since late April.
Bearish bets on the baht were more certain, with the worsening situation of COVID-19 in China, which is pursuing a ‘zero COVID’ strategy, raising fears of delaying the return of Chinese tourists to Thailand.
Pessimism levels about the Chinese yuan, seen as a safer bet among Asia’s currencies, remained largely unchanged.
The Philippine peso was the most exposed Asian currency after hitting a 17-year low earlier this week, as investors feared that interest rate hikes in Bangko Sentral ng Pilipinas (BSP) would remain behind the curve in the fight against inflation.
“What makes PHP stand out here is that the Philippines is a net importer of food, and it also has a large food trade deficit. This makes the country quite vulnerable to rising food costs in the wake of the pandemic,” said Daniel Dobrovsky, an analyst. in IG.
“At the end of the day, despite the recent improvement in hawkish BSP expectations, the Fed remains much bolder.
The survey responses were compiled before BSP surprised the markets on Thursday with a 75 basis point off-cycle hike to the benchmark interest rate.
Concerns that central banks, including the Philippines and Thailand, may lag far behind the Fed in tightening policy have eroded confidence in these countries’ currencies in recent months.
Thailand has so far left its key interest rate at a record low, but economists expected the Bank of Thailand to raise interest rates at its next meeting on August 10.
In another step out of the cycle, the central bank of Singapore also refocused the midpoint in its currency exchange rate policy range earlier in the day.
Analysts raised their short positions on the Indian rupee, which hit record lows every day so far this week despite the central bank’s efforts to boost foreign exchange inflows.
India, like many other economies, is battling rising inflation despite tightening policies and restrictions on wheat export.
The Asian Currency Positioning Survey focuses on what analysts and fund managers think of the current market positions in nine emerging Asian currencies: Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian. Ringgit and Thai baht.
The survey uses estimates of net long and short positions on a scale of 3 to plus 3. A score of plus 3 indicates that the market is significantly long on the US dollar.
The numbers include positions filled by non-deliverable attackers (NDFs).
The results of the survey are provided below (positions in USD per currency):
DAT USD / USD / USD / USD / USD / USD / USD / USD / USD
E CNY KRW SGD IDR TWD INR MYR PHP THB
14- 1.07 1.84 1.44 1.59 1.76 1.98 1.68 2.06 1.78
30- 1.09 1.69 1.08 1.50 1.15 1.80 1.63 2.05 1.39
16- 1.54 1.79 1.35 1.33 1.23 1.66 1.67 1.70 1.34
02- 1.22 0.56 0.38 0.90 0.73 1.18 1.06 0.59 0.54
19- 1.9 1.55 1.07 1.19 1.63 1.35 1.53 1.15 1.56
05 – 1.75 1.5 0.73 0.56 1.49 1.04 1.47 1.09 1.33
21 – 0.1 1.07 -0.1 -0.0 0.94 0.75 0.89 1.00 0.71
7 April 3
07 – -0.4 0.99 -0.4 -0.0 0.81 0.63 0.32 0.53 0.31
April 1 6 5
(Edited by Rashmi Aish)