February 8, 2018 / 6:48 AM / a month ago

Bullish bets on most Asian currencies drop as yields spike lifts dollar: Reuters poll

(Reuters) - Investors trimmed their long positions in most emerging Asian currencies in the last two weeks, a Reuters poll showed, as rising Treasury yields helped the dollar rebound from a three-year low touched in late January.

A boy walks past a billboard of the Renminbi (yuan) symbol in Haikou, south China's Hainan province, January 6, 2007. The yuan strengthened against the dollar late on Friday in line with other major Asian currencies, but trading remained sluggish after the new year holiday. REUTERS/Vito Lee (CHINA)

There has been a steady climb in U.S. yields over the past two weeks on expectations the European Central Bank will tighten monetary policy, and on increasing worries that inflation is accelerating due to bigger paychecks.

The benchmark 10-year yields US10YT=RR rose to a four-year high of 2.88 percent, with traders adding to their positions for a faster pace of rate hikes, lending support to the dollar.

Among Asian currencies, bullish bets on the Chinese yuan CNY=CFXS dipped for the first time since December, while that on the Malaysian ringgit MYR= touched their lowest since November.

Long positions on the Singapore dollar SGD=D3 and the Taiwan dollar TWD=TP reached a near two-month low, according to the poll of 12 analysts, traders and fund managers.

Investors, however, turned more bearish on the Philippine peso PHP=PDSP, with short positions at their highest since November.

The peso has been the weakest in Asia against the dollar so far this year, shedding 2.8 percent, with vulnerability to capital outflows seen increasing due to deficit concerns.

The Philippine central bank projects there was a current account deficit of $100 million last year, the first since 2002, and it forecasts a deficit of $700 million this year.

Bullish bets on the Korean won KRW=KFTC were trimmed to five-month lows, while positions on Indonesian rupiah IDR= went from long to nearly neutral.

The won has lost about 1.6 percent so far this year, making it the second weakest currency in the region after the peso.

Bullish sentiment towards the Thai baht THB=TH weakened slightly, while the Indian rupee INR=IN, which has slid about 0.5 percent so far this year, saw bullish bets at their lowest since January 2017.

“The more neutral positioning on the rupee reflects the Indian markets’ heightened unease about the government’s fiscal path, triggered by its budget last week, which has led to higher inflation expectations,” said Reuters FX analyst Krishna Kumar.

The poll was conducted between Tuesday and Wednesday, with the bulk of the responses coming in by Wednesday.

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 on U.S. dollars.

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

Reporting by Christina Martin in Bengaluru; Additional reporting by Aaron Saldanha, and Chris Thomas; Editing by Gopakumar Warrier

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