Long bets on China's yuan at 6-month high; bears pounce on Indian rupee

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  • Bearish bets on India's rupee at highest in 20 months
  • Thai baht, Philippine peso, S.Korean won short bets ease
  • Yuan up 2.5% so far in 2021; rupee set for 4th annual loss

Dec 16 (Reuters) - Bullish bets on the Chinese yuan hit their highest since early June as the world's second-largest economy maintained a strong trade surplus and saw robust portfolio inflows even as growth slowed, a Reuters poll showed on Thursday.

Short positions on the Indian rupee were raised to their highest since April 2020, while bearish bets on the Singapore dollar , Indonesia's rupiah and the Malaysian ringgit also increased, a fortnightly poll of 10 respondents showed.

Fears that the Omicron variant would again impede economic activity and travel have left some investors holding out for more information, even as some governments rush to vaccinate those left out, and get boosters administered to the rest.

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The yuan has gained 2.5% so far this year, the most among emerging market peers in Asia, as robust export demand helps the country keep its trade surplus robust, and investors maintain high exposure to Chinese assets.

Inflows into China's bond market rose sharply in November, supported by the inclusion of government debt in the FTSE World Government Bond index, while equity markets saw net inflows compared to heavy outflows over the June-August period, data compiled by ANZ showed.

Analysts at ANZ said they expect the Chinese central bank "to be tolerant of yuan strength, though they will act to curb excessive volatility in either direction".

Another consideration on the minds of investors is how quickly the U.S. Federal Reserve will wind down its pandemic-era bond buying and raise rates. Late Wednesday after the poll closed, the Fed said its bond-buying programme would end by March, followed by three possible rate hikes in 2022. read more

The Indian rupee is set for a more than 4% drop this year, its fourth straight annual loss, with losses accelerating towards the end of the year as the country's red-hot equity markets start to cool and trade deficit balloons.

India's economic rebound faces further risks from the Omicron variant, inflation and global supply-chain disruptions, with the central bank leaving its key lending rate at a record low last week while outlining plans to drain surplus liquidity from the banking system.

Short bets on the baht , the worst performer among Asia's emerging markets with a more than 10% slump in value, eased as Thailand re-opened its borders to foreign visitors, which should support the country's tourism-reliant economy.

Bearish views on South Korea's won were lowered as the currency benefited from an influx of foreign funds into local debt and equity.

Asian currencies are expected to be resilient in the face of the Fed tightening its policy in 2022, with the yuan's strength serving as an "important anchor" for regional currencies, ANZ analysts said.

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):

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Reporting by Sameer Manekar in Bengaluru, writing by Nikhil Kurian Nainan and Anushka Trivedi; Editing by Subhranshu Sahu

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