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Asia FX sentiment bullish for first time in six months; baht view pessimistic

[SINGAPORE] Sentiment toward most emerging Asian currencies turned bullish for the first time in six months in recent weeks, a Reuters poll showed on Thursday, amid views that the US Federal Reserve may wait longer before starting to raise interest rates.

Views on Thailand's baht, however, swung to bearish as the central bank on Wednesday surprised markets by cutting its key policy rate for a second straight meeting.

The rate cut forced the baht to give up most of this year's gains. In addition, the Bank of Thailand relaxed curbs on capital outflows, a move aimed at weakening the strong baht, which has hurt exports.

By contrast, long positions were seen on most other emerging Asian currencies, according to the survey of 16 currency strategists of banks and fund management companies conducted between Tuesday and Thursday.

Indeed, it was the first poll since late October in which participants were bullish on seven of the nine currencies in the survey.

The Fed downgraded its view of the US labour market and economy on Wednesday in a policy statement, suggesting it may wait longer to begin raising interest rates.

Long positions in the Chinese yuan rose to the largest since early December as the central bank continued to support the renminbi through firmer midpoints and intervention.

Bullish bets on the Taiwan dollar hit the highest since early July as offshore money continued to flow into the island's stock market.

Foreign investors bought net NT$100.4 billion (S$4.36 billion) worth of stocks this month, the Taiwan Stock Exchange data showed.

Sentiment on Singapore's dollar turned bullish with its long positions largest since early July.

Investors have been unwinding bearish bets on the Singapore dollar since the city-state's central bank on April 14 unexpectedly held off from further easing. Exports and industrial output in March were also better than expected while inflation fell less than market forecasts.

Long positions in the South Korean won touched the highest since late August.

The won rose 3.5 per cent against the dollar in April, the largest monthly gain since October 2011 on equity inflows. Against the yen, the South Korean currency touched a seven-year high.

Views on the Malaysian ringgit turned bullish for the first time since late August.

Oil prices have stabilised recently, easing concerns that sliding crude may hurt the finances of Malaysia - a net oil exporter. Bond inflows also supported the ringgit.

However, the Indian rupee and the Indonesian rupiah failed to benefit from the better mood in Asia.

Bullish bets on the rupee fell to the lowest since mid-February.

The rupee last week lost 1.9 per cent against the dollar, its largest weekly depreciation since late August 2013, Thomson Reuters data showed. The Indian currency fell on capital outflows amid uncertainty over foreign portfolio investment tax.

Short positions in the rupiah rose as foreign investors continued to sell Indonesian shares on disappointing corporate earnings and worries about its slowing economy.

The currency poll is focused on what analysts 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 US dollars. The figures include positions held through non-deliverable forwards (NDFs).

REUTERS