BANGKOK, July 15 (Reuters) – Bets on all Asian currencies firmed at fresh multi-year highs, as sky-high inflation dampened sentiment on fears of a slowdown in sharply rising interest rates, a Reuters poll showed.
Short positions in the Thai baht, Philippine peso and Singapore dollar were at their highest level since 2018, when the data was first available, according to a biweekly poll of 13 respondents.
Analysts on average have not held a net long position in any Asian currency since late April.
Bearish bets on the baht have strengthened the most, as China’s worsening Covid-19 situation has fueled fears that Chinese tourists will return to Thailand following a ‘zero-Covid’ strategy. Pessimism on the Chinese yuan, seen as a safe bet among Asian currencies, remained largely unchanged.
The Philippine peso was the most shorted Asian currency after hitting a 17-year low earlier this week, as investors felt the Bangko Sentral ng Pilipinas’ (BSP) rate hike still left it behind the curve in fighting inflation.
“What makes PHP stand out here is that the Philippines is a net food importer and has a significant food trade deficit. This makes the country very vulnerable to food costs following the pandemic,” said analyst Daniel Dubrowski. On IG.
“At the end of the day, the Federal Reserve remains more hawkish despite recent improvements in hawkish BSP expectations.”
The poll responses were gathered before the BSP surprised markets on Thursday with an out-of-cycle 75 basis point hike to its benchmark interest rate.
Concerns that central banks, including those of the Philippines and Thailand, could fall well short of federal policy have dampened confidence in the currencies of these countries in recent months.
Thailand has left its key rate low so far, but economists predict the Bank of Thailand will raise it at its next meeting on August 10.
Singapore’s central bank earlier in the day re-set the exchange rate policy at the midpoint of the band.
Analysts have raised their short positions on the Indian rupee, which has hit a daily high this week despite efforts by the central bank to increase foreign exchange flows.
India, like other economies, is battling rising inflation despite policy restrictions and restrictions on wheat exports.
The Asia Currency Position poll focuses on what analysts and fund managers believe is the current market position 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 Thai Baht.
The poll uses a scale of 3 to plus 3 to estimate long or short positions. A plus 3 point indicates that the market is very long in the US dollar. The figures include areas occupied by non-transferable transmitters (NDF). – Reuters