Analysts remained upbeat on most Asian currencies, although they slightly reduced some bets, a Reuters poll showed on Thursday, as a defensive U.S. dollar on the back of a dovish Federal Reserve boosted the appeal of risk-sensitive assets.
Long bets were highest on the Malaysian ringgit and Thai baht, with those on the latter at their highest level since January 2023, on the back of strong growth fundamentals and stabilized policy.
The responses to the biweekly survey of 10 economists and analysts were received ahead of the US Federal Reserve’s half-point interest rate cut and Bank Indonesia’s surprise quarter-point interest rate cut on Wednesday.
Anticipation of Fed rate cuts has pushed the dollar onto the defensive, providing much-needed relief to emerging markets and boosting their appeal. Most Asian currencies rallied strongly against the dollar in August.
“We do not rule out further bouts of dollar weakness in the coming weeks and expect downward pressure on the USD/Asia exchange rate to continue,” Barclays analysts said.
The dollar index is close to 100 against a basket of major currencies, down from 104 at the end of July.
Analysts said they expected Asian currencies to continue to appreciate in the fourth quarter, but predicted a reversal in the first half of 2025.
Ryota Abe, economist at Sumitomo Mitsui Banking Corp, said the market’s view of the Fed cutting rates by year-end “seems excessive,” which could lead to a correction in Asian emerging market currencies.
Bullish bets on the Chinese yuan and the Singapore dollar have been pulled back to levels seen four weeks ago, while those on the Philippine peso have hit a four-year high.
Analysts were long the Indonesian rupiah for the fourth consecutive edition of the survey – the longest since May 2023 – highlighting recent appreciation stemming from robust economic fundamentals and increasing flows to emerging markets.
The rupiah has appreciated more than 6% since July and is set to continue rising after Bank Indonesia (BI) surprised by a decision to cut rates to support growth, beating the Fed.
Barclays analysts said Bank Indonesia “is expected to align with the Fed in terms of the magnitude of total cuts,” which should not “necessarily cause the IDR to fall out of favor with markets from a rate differential perspective.”
The Indian rupee continued to be out of favour with analysts, although short positions have been halved since the start of August, with the currency recovering following a sell-off driven by the unwinding of carry trades in the yen.
The Asian Currency Positioning Survey looks at what analysts and fund managers believe to be 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 Thai baht.
The survey uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates that the market is heavily long U.S. dollars.
The figures include positions held through non-deliverable forwards (NDFs).
The survey results are presented below (positions in US dollars against each currency):
DATE USD/CNY USD/KRW USD/SGD USD/IDR USD/TWD USD/INR USD/MYR USD/PHP USD/THB
19-Sep-24 -0.67 -0.9 -1.12 -1.18 -0.66 0.33 -1.3 -1.1 -1.33
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 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
