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Asian FX sentiment better as timing of US rate rise less clear

Thursday, April 2, 2015 - 15:57
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Sentiment towards emerging Asian currencies has improved over the past two weeks, with views on the Chinese yuan turning optimistic, a Reuters poll showed on Thursday, as investors became less convinced US interest rates would rise in June.

[SINGAPORE] Sentiment towards emerging Asian currencies has improved over the past two weeks, with views on the Chinese yuan turning optimistic, a Reuters poll showed on Thursday, as investors became less convinced US interest rates would rise in June.

Bearish bets on the Singapore dollar slid, but sentiment on the unit was still the third most negative among regional currencies ahead of a central bank policy meeting in the city-state later this month.

The yuan had long positions for the first time since late January, according to the survey of 18 currency analysts and traders from banks and asset management companies conducted between Tuesday and Thursday.

The bullish bets were estimated to be the largest since early December.

In March, the yuan rose 1.1 per cent against the dollar, the largest monthly gain since December 2011, as China's central bank supported the currency by fixing daily trading mid-points higher and intervening to quell speculation of a further slide.

The Singapore dollar's bearish bets slid to the lowest since late October when it had small long positions at a time of improving sentiment on emerging Asian currencies.

Still, the outlook for the currency remains uncertain as the Monetary Authority of Singapore is set to hold a policy meeting in April.

A slowing economy and inflation have kept expectations of further easing in April alive, even though a poll on March 25 showed the central bank was seen maintaining its stance of allowing the local dollar to appreciate.

Sentiment on the Taiwan dollar became positive for the first time since late October. The island's currency rose 0.3 per cent on foreign inflows and exporters' demand in March, when most regional currencies fell.

Long positions in the Indian rupee rose to the largest in nearly a month as the currency posted its first gain in four quarters due to capital inflows.

Short positions in the South Korean won fell to a near two-month low. Bearish bets on the Indonesian rupiah and the Malaysian ringgit fell to the lowest since mid-February.

On March 18, the US Federal Reserve dropped a reference to being "patient" on rates from its policy statement, opening the door wider for an increase this year. But at the same time it downgraded its economic growth and inflation forecasts, signalling it was in no rush to raise borrowing costs.

That prompted investors to shift forecasts of the timing of the first rate rise to September from June. US jobs data for March due on Friday will provide more clues.

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