Investors maintained bearish bets on most Asian currencies as prospects of a buoyant U.S. dollar pushed them away from riskier assets after Federal Reserve officials seemed uncertain whether interest rates were high enough to tame inflation.
Short positions in the Indonesian rupiah eased after bears on the currency firmed to their highest since November 2022, with those on China’s yuan, Indian rupee and Malaysian ringgit also easing.
Investor confidence in the rupiah has taken a hit amid U.S. monetary policy tightening and rising geopolitical risks that prompted the country’s central bank to unexpectedly raise rates last month to arrest the currency’s decline.
“We expect the rupiah to be a bit softer for the time being, given thatwe still have relatively high U.S. rates, and there’s also the Indonesian presidential elections in February that will create some degree of political risk premium in the unit,” said Wei-Liang Chang, macro strategist for FX and Credit at DBS.
Indonesia booked a $3.48 billion trade surplus last month, above estimates, as exports and imports fell less than expected, official data showed, bolstering betsits central bank could keep rates on hold next week.
Recent statements from Fed Chair Jerome Powell indicated that policymakers “are not confident” that interest rates are high enough to finish the battle with inflation, and may be nearing the end of how much help they can expect in lowering price pressures from improvements in the supply of goods, services and labour.
The possibility of interest rates staying higher has prompted investors to steer away from riskier Asian currencies and instead take refugein the safety of the U.S. dollar, hinting at near-term strength in the greenback.
The fortnightly poll was conducted before the October U.S. inflation data, which showed signs of slowing, supporting views that the Fed was probably done raising interest rates.
Bearish bets on the Philippine peso PHP=PH and Thailand’s baht THB=TH also eased.
Lingering concerns around inflation in the Philippines, currently reeling beyond the central bank’s 2%-4% target range for the year,has pressured the peso. The country’s government plans to pursue supply-side interventions and demand-side management measures to address inflation.
The Philippine monetary authorities kept its policy rate steady at 6.5% on Thursday, saying the inflation outlook has moderated. The move follows the central bank’s off-cycle 25 basis point hike on Oct. 26.
In China, new home prices fell for the fourth straight month, with dozens of cities hit by declines, the most since the peak of the COVID-19 pandemic last year.
“If China continues to improve, then that should provide respite to all the Asian currencies, especially currencies that are more reliant on trade with China, such as the ringgit and the Korean won,” DBS’ Chang added.
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).
Source: Reuters
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