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Asia FX sentiment improves further, bearish Sing dollar bets lowest in 6 months

Thursday, April 16, 2015 - 16:15

[SINGAPORE] Sentiment towards emerging Asian currencies has improved further over the past two weeks with the Singapore dollar's short positions at the lowest in nearly six months, a Reuters poll showed, supported by expectations of a delay in US interest rate hikes.

Bearish bets on the Singapore dollar fell to the lowest since late October, according to the survey of 14 currency analysts of banks and fund management companies conducted between Tuesday and Thursday.

Singapore's central bank on Tuesday unexpectedly held off further monetary easing, saying an improving global growth outlook would underpin the trade-dependent economy.

Bullish bets on the Chinese yuan rose to their largest level since early December even as data this week showed China's economy grew at its slowest pace in six years in the first quarter.

In an interview with Financial Times, China's Premier Li Keqiang said that he did not want to use currency depreciation to boost the flagging exports sector.

The People's Bank of China also set its daily trading guidance rate higher.

Sentiment on the Thai baht was also at its most optimistic since late August as the currency found support from stocks and bonds inflows.

Bearish bets on the Indonesian rupiah slid to a near five-month low as the central bank was spotted intervening to support the second-worst performing Asian currency this year.

Some foreign investors bought Indonesian bonds for higher yields. The country reported an unexpectedly large trade surplus in the first quarter, helping to narrow the current account deficit.

Long positions in the Indian rupee rose to its highest since early March.

Moody's Investors Service upgraded India's sovereign rating outlook to positive on April 9, as it expects action by policymakers to lift economic growth.

Improving sentiment on most emerging Asian currencies came as some weak US economic data added to expectations that the Federal Reserve may not be hurried into raising interest rates.

US industrial output suffered its biggest drop in more than 2-1/2 years in March, partly due to plummeting oil and gas well drilling.

Prospects of higher US borrowing costs over the near term had already cooled after the Fed downgraded its economic growth and inflation forecasts at the March policy review. That helped to improve sentiment towards Asian currencies, as shown in the previous poll on April 2.

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