Investors Adjust Bets on Asian FX, Bullish on China's Yuan
By Sameer Manekar
(Reuters) – Investors trimmed bearish bets on most Asian currencies, encouraged by the reopening of tourism-reliant economies, while sentiment remained moderately bullish on China’s yuan despite signs of economic stress, a fortnightly Reuters poll found.
Short positions on the Indian rupee, Philippine peso, Thai baht and South Korean won eased, while long bets on the Singapore dollar and Indonesia’s rupiah declined, the poll of 11 respondents showed.
Investors remained somewhat bullish on the Chinese yuan even as the world’s second-largest economy faces downward pressure from a debt-riddled property sector, slowing factory activity, soft domestic demand and rising inflation.
Despite the pressures, the yuan, the most actively traded emerging currency, has advanced nearly 2% so far this year against the U.S. dollar. It touched a near one-week high on Thursday and was at 6.3942 per U.S. dollar, as of 0530 GMT. [CNY/]
Analysts at Morgan Stanley cite a strong trade surplus of $66.76 billion in September, healthy foreign direct investment and bond inflows as the reasons for the yuan’s appreciation this year.
“Opposed to the conventional thinking of money moving out of China due to a tighter interest rate differential between the U.S. and China, foreign investors actually bought into the China fixed income market,” analysts at Morgan Stanley said in a note.
“The (Chinese) government is likely to be more aggressive in policy easing in the next few months to raise growth prospects in the first quarter of 2022, which would again help the yuan,” they said, adding they recommend staying long on the yuan.
In Southeast Asia, the gradual easing of international travel curbs is boosting sentiment in the hard-hit tourism sector, fuelling expectations of a stronger economic rebound in the coming year.
Long positions on the Indonesian rupiah, which is among the best performing currencies in the region so far this year, declined significantly as pandemic-induced restrictions are expected to put brakes on the country’s nascent economic recovery.
Meanwhile, a separate Reuters poll found that emerging market currencies were headed for trouble next year on mounting expectations of the U.S. Federal Reserve raising interest rates, with the yuan expected to depreciate over 1% to 6.47 per dollar in a year.
The Reuters survey 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 U.S. dollars. The figures included positions held through non-deliverable forwards (NDFs).
The survey findings ASIAPOSN are provided below (positions in U.S. dollar versus each currency):
DATE USD/CNY USD/KRW USD/SGD USD/IDR USD/TWD USD/INR USD/MYR USD/PHP USD/THB
04-Nov-21 -0.51 0.63 -0.09 -0.41 0.1 0.54 -0.07 0.27 0.66
21-Oct-21 -0.55 0.91 -0.27 -1.12 0.3 0.7 0.1 0.44 1.1
09-Oct-21 0.27 1.35 0.2 -0.29 0.28 0.1 0.3 0.84 1.2
23-Sep-21 0.25 0.96 -0.15 -0.5 -0.2 -0.45 0.25 0.56 0.75
09-Sep-21 -0.09 0.33 -0.36 -0.44 -0.69 -0.88 0.23 0.4 0.12
26-Aug-21 0.425 0.868 0.474 0.18 0.326 -0.08 1.192 0.779 1.351
12-Aug-21 0.32 0.69 0.77 0.2 -0.09 0.37 1.39 1.17 1.75
29-July-21 0.27 0.78 0.71 0.27 0.36 0.29 1.4 1.21 1.49
15-July-21 -0.15 0.27 0.53 0.23 0.13 0.68 1.06 1.06 1.56
01-July-21 -0.29 -0.29 0.02 0.36 -0.19 0.5 0.49 -0.04 0.85
17-Jun-21 -0.63 -0.36 -0.49 -0.5 -0.58 -0.21 -0.05 -0.31 0.2
(Reporting by Sameer Manekar in Bengaluru; Editing by Subhranshu Sahu)
