Asian FX bears ease as U.S. rate cut bets solidify: Reuters poll By Reuters

By John Biju

(Reuters) – Short positions on most Asian currencies eased, as rising expectations of at least two rate cuts by the U.S. Federal Reserve this year and an easing dollar boosted risk sentiment, a Reuters poll found on Thursday.

Bearish bets on the Singapore dollar and the Thai baht were at the lowest since early January, while those on the Indonesian rupiah eased to their lowest level since mid-March, according to a fortnightly poll of 11 analysts.

Growing expectations of the Fed’s two rate cuts this year after a slew of worse-than-expected economic data was the “main factor” in bearish bets easing, said Poon Panichpibool, a markets strategist at Krung Thai Bank.

Fed Chair Jerome Powell has said “more good data” would build the case for the U.S. central bank to cut interest rates.

Investors now await the release of June inflation data from the U.S., due later on Thursday, which is expected to show inflation cooling and make a case for a September rate cut.

If the market remains certain on the Fed delivering two rate cuts this year, then high-yielding emerging market currencies such as the Indian rupee and the Indonesian rupiah could outperform low-yielding peers, Panichpibool added.

The Indian rupee, the best performer in the region so far this year, was among the least-shorted currencies.

Short bets on the Philippine peso was at the lowest level since early April. Philippine central bank governor said last week that it had more scope to cut interest rates at its next meeting in August after annual inflation slowed in June.

The Chinese yuan remained among the most-shorted among Asian currencies.

Data from China, the single biggest trading partner to many emerging Asian countries, showed that consumer price inflation came in below expectations while producer price deflation persisted, pointing to stubbornly weak demand.

“Markets are anticipating further policy support for the economy and the housing sector, which could rejuvenate equity markets and support the RMB (yuan),” analysts at DBS wrote.

Bearish bets on the South Korean won also eased. All responses were received before the Bank of Korea stood pat on its interest rates, saying it was time to prepare for a pivot to rate cuts.

The Asian currency positioning 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 U.S. dollars.

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

The survey findings are provided below (positions in U.S. dollar versus each currency):

DATE

11-Jul-24 1.05 0.87 0.06 0.73 0.68 0.22 1.03 0.86 0.51

27-Jun-24 1.34 1.28 0.80 1.49 0.88 0.46 1.00 1.37 0.91

13-Jun-24 0.95 0.87 0.62 1.22 0.64 0.37 1.00 1.23 0.92

30-May-24 1.05 0.72 0.33 0.94 0.53 0.00 0.81 1.19 1.00

16-May-24 1.05 0.96 0.35 0.96 1.02 0.39 1.23 1.29 1.00

2-May-24 1.25 1.61 0.89 1.39 1.40 0.49 1.46 1.44 1.39

18-Apr-24 1.25 1.59 0.80 1.32 1.24 0.43 1.42 1.19 1.28

4-Apr-24 1.18 1.09 0.42 1.13 1.17 0.00 1.15 0.62 1.35

21-Mar-24 0.92 0.82 0.33 0.60 0.92 -0.54 1.12 0.47 1.13

7-Mar-24 0.84 0.54 0.25 0.53 0.64 -0.59 1.14 0.52 1.05