Fed rate hike views hurt Asia FX sentiment; yuan bearish bets climb

[SINGAPORE] Sentiment towards most emerging Asian currencies turned bearish in the last two weeks as investors grew more confident in the likelihood of a US interest rate hike in December, a Reuters poll showed.

With the dollar on a firm trend, the Chinese yuan saw the largest bearish positions since late July, according to the survey of 17 fund managers, analysts and currency traders conducted between Tuesday and Thursday.

After being held relatively steady for much of the summer, the yuan has hit six-year lows in recent sessions, breaching the key psychological level of 6.7 to the dollar without signs of official intervention that it has seen in the past.

That has raised questions about whether authorities want to allow further slow depreciation to support the economy.

Pessimistic bets on the Singapore dollar hit an eight-month peak on the firmer dollar and expectations that Singapore's central bank will not ease policy at a review on Friday despite a sputtering economy, the poll showed.

The city-state's currency has slumped to its weakest since March 10 as some investors priced in risks of easing, although most economist expect the Monetary Authority of Singapore to stand pat.

Sentiment on Thailand's baht also turned pessimistic, with its bearish positions at the largest since October last year. Views on the currency had been bullish since late June.

The baht touched its lowest in about nine months on Wednesday, tracking a near 7 per cent plunge in Bangkok shares, on concerns over the health of 88-year-old King Bhumibol Adulyadej and after police warned of a bomb plot in the capital.

The health of the King has "overall not yet stabilised", the palace said on Wednesday.

Anxiety over his health and an eventual succession has formed the backdrop to more than a decade of bitter political divide in Thailand.

The Philippine peso reported the largest short positions since November 2008 in the depths of the global financial crisis.

The peso hit a seven-year low on Wednesday as recent solid US economic data added to expectations that the Federal Reserve will raise interest rates in coming months.

Philippine markets have been heavily sold since July, partly due to growing uncertainty over the economic and foreign policies of new President Rodrigo Duterte.

The South Korean won and the Malaysian ringgit saw their largest pessimistic bets since late May.

Foreign investors sold Seoul stocks as Samsung Electronics Co Ltd's decision to scrap its fire-prone Galaxy Note 7 smartphone raised worries about South Korea's exports.

The country's bonds saw outflows on expectations that the central bank is likely to leave interest rates unchanged in a near term on growing household debts. The Bank of Korea earlier on Thursday kept borrowing costs on hold.

The ringgit touched a near eight-month low as Malaysia's central bank data showed the country in September suffered the largest monthly bond outflows since August last year.

The 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 US dollars.

The figures include positions held through non-deliverable forwards (NDFs).

REUTERS