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. There has been a steady climb in US 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 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 dipped for the first time since December, while that on the Malaysian ringgit touched their lowest since November.
Long positions on the Singapore dollar and the Taiwan dollar 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, 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 were trimmed to five-month lows, while positions on Indonesian rupiah 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 weakened slightly, while the Indian rupee, 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 US dollars.
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