Analysts’ positions on most emerging Asian currencies firmed deep in bear territory, a Reuters poll found, as a resilient dollar, a coerced yuan, a decisively hawkish U.S. Federal Reserve, and global economic headwinds shroud the outlook.
Short bets on the Philippine peso, Malaysian ringgit, Thai baht, Indonesian rupiah and Indian rupee inched higher from their already strong positions, signifying a growing weak sentiment, the fortnightly poll of 12 analysts showed.
The recent strengthening of the U.S. dollar on the back of outsized rate hikes by the Fed has weighed heavily on regional currencies, with most of them lingering near multi-year, or even record, lows.
However, investors are hoping the Fed may consider a pause or a slowdown in policy normalisation as recent U.S. data indicates the economy could be starting to be pinched by the aggressive tightening so far this year.
Malaysia’s ringgit–down more than 10% so far this year and among the worst performing currencies in the region–was among the most shorted by the analysts polled, amid uncertainty surrounding general elections ahead of a budget announcement.
Analysts at Australia and New Zealand Banking Group see further challenges for the ringgit in the fourth quarter on moderating global demand due to liquidity tightening cycles, which will likely weigh on the country’s external balance.
“A slowdown in China’s growth momentum will further impact the ringgit’s strength,” the ANZ analysts said in a note.
“In addition, moderating growth will likely trigger further outflows from the financial markets, adding to the ringgit’s woes in fourth quarter.”
Meanwhile, inflation remains uncomfortably high for most regional economies, keeping central banks tied to their policy tightening approach, with the health of the economy and dwindling currencies in focus.
Analysts were also significantly short on the Philippine peso and the Thai baht, with data from earlier this week showing inflation lingered at multi-year highs in both economies, suggesting further rate hikes.
Short positions on China’s yuan inched lower, but remained in firmly in bear territory as the country’s central bank took actions to support the wobbly currency that has weakened more than 10% so far this year, with most of the losses coming since July.
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, Taiwanese 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 the U.S. dollar.
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 USD/CNY USD/KRW USD/SGD USD/IDR USD/TWD USD/INR USD/MYR USD/PHP USD/THB
06-Oct-22 1.94 2.25 1.53 1.86 2.12 1.55 2.22 2.16 2.08
22-Sept-22 2.09 2.39 1.61 1.35 2.37 1.23 1.9 1.94 1.86
08-Sept-22 2.04 2.33 1.54 1.13 1.93 1.35 1.89 1.7 1.59
25-Aug-22 1.68 1.85 1.12 1.03 1.53 1.31 1.9 1.38 1.28
11-Aug-22 0.86 1.1 0.51 0.83 1.14 1 1.41 0.88 0.87
28-July-22 1.14 1.63 0.92 1.31 1.42 1.62 1.59 1.54 1.89
14-July-22 1.07 1.84 1.44 1.59 1.76 1.98 1.68 2.06 1.78
30-June-22 1.09 1.69 1.08 1.5 1.15 1.8 1.63 2.05 1.39
16-June-22 1.54 1.79 1.35 1.33 1.23 1.66 1.67 1.7 1.34
02-June-22 1.22 0.56 0.38 0.9 0.73 1.18 1.06 0.59 0.54
19-May-22 1.9 1.55 1.07 1.19 1.63 1.35 1.53 1.15 1.56
