By Roushni Nair
(Reuters) – Analysts have raised bullish bets on most Asian currencies after mixed data heightened concerns about economic growth in the world’s largest economy, increasing the odds of outsized U.S. rate cuts and tarnishing the allure of the almighty dollar.
Long bets on the South Korean won and the Singapore dollar, which is the best performer in the region so far this year, increased to their highest since Jan. 26, 2023. Bearish bets on the Indian rupee stayed intact, a fortnightly poll of 12 analysts showed on Thursday.
Singapore is among the few countries in the world with a triple-A sovereign credit rating that is reflective of exceptionally strong fiscal and external balance sheets, factors that firm its position as a safe harbour for investors.
Meanwhile, the Indian rupee’s current low value against the greenback is largely due to the Reserve Bank of India’s (RBI) efforts to control the currency’s exchange rate, mainly by buying foreign currency to build up reserves over the past ten years, analysts at ANZ wrote.
“The outcome (of RBI’s intervention) is rising FX reserves, unusually low exchange rate volatility and an active use of the forward book to synchronise FX intervention with domestic liquidity conditions,” ANZ analysts said.
The U.S. dollar’s impressive 5% gain against key currencies in the first half of the year has been largely erased as market expectations shifted to more aggressive interest rate cuts.
Data showed that U.S. job openings fell to a 3-1/2-year low in July, indicating a continued easing of labour market tightness, while statements from San Francisco Fed President Mary Daly further reaffirmed the need for rate cuts.
Traders see a quarter-point reduction at the Fed’s Sept. 17-18 meeting as the slightly more likely move, but give a 50-basis-point cut about a 49% chance, up from 41% immediately before the data, rate futures contracts show.
Elsewhere, bullish bets on the Chinese yuan rose to their highest since Feb. 9, 2023, and long bets on the Thai baht rose to their highest since Jan. 26, 2023.
The significant yield advantage of the rupee over the yuan, combined with their contrasting prospects and stable exchange rates, has made borrowing in yuan to invest in rupee-denominated assets one of the most profitable carry trade strategies in Asia.
In Thailand, easing political tensions and favourable economic growth have built the case for increased foreign inflows.
Analysts maintained their bullish stance on the Indonesian rupiah, the Philippine peso, and the Malaysian ringgit.
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/ID USD/TWD USD/INR USD/MYR USD/PHP USD/THB
R
05-Sep-24 -0.85 -1.09 -1.26 -1.05 -0.77 0.21 -1.46 -1.00 -1.22
22-Aug-24 -0.62 -0.93 -1.08 -1.26 -0.70 0.21 -1.57 -1.03 -1.16
08-Aug-24 -0.02 0.05 -0.61 -0.02 0.59 0.60 -0.78 -0.29 -0.57
25-Jul-24 1.07 0.79 -0.33 0.35 0.86 0.12 0.39 0.43 0.02
11-Jul-24 1.05 0.87 0.06 0.73 0.68 0.22 1.03 0.86 0.51
27-Jun-24 1.34 1.28 0.80 1.49 0.88 0.46 1.00 1.37 0.91
13-Jun-24 0.95 0.87 0.62 1.22 0.64 0.37 1.00 1.23 0.92
30-May-24 1.05 0.72 0.33 0.94 0.53 0.00 0.81 1.19 1.00
16-May-24 1.05 0.96 0.35 0.96 1.02 0.39 1.23 1.29 1.00
2-May-24 1.25 1.61 0.89 1.39 1.40 0.49 1.46 1.44 1.39
(Reporting by Roushni Nair and Sameer Manekar in Bengaluru; Editing by Mrigank Dhaniwala)
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