Short bets on most Asian currencies recede on Fed rate-cut prospects

Investors cut bearish bets on most Asian units and went long on the rupiah for the first time in nearly three months, a Reuters poll showed, as hopes of the US Federal Reserve trimming interest rates weakened prospects for the greenback. Despite a raft of strong US economic data lately, concerns over the US-China trade tensions and weak inflation have turned most Fed officials decidedly dovish. The central bank's first rate reduction in a decade is expected later this month.
An average of 14 analysts were bullish on the Indonesian rupiah even as the country's central bank is expected to go on an easing cycle ahead of a Fed rate cut. Bank Indonesia is due to announce its rate decision on Thursday, with the central bank widely expected to cut rates by 25 basis points to 5.75%.
Even though markets unwound some bearish bets on the South Korean won, it was still the most shorted unit in the region due to concerns over the country's worsening political and economic dispute with crucial trade partner Japan. Tensions between the two US allies took a turn for the worse earlier this month after Tokyo restricted exports of high-tech materials to Seoul.
Bank of Korea on Thursday unexpectedly cut its policy interest rate for the first time in three years over concerns about the dispute amid a slowdown in the economy. Responses for the poll came in before the central bank's decision. Meanwhile, long positions on the Thai baht receded from the last poll as the central bank clamped down on short-term foreign inflows to temper rapid gains in Asia's best performing currency this year.
Policymakers felt further appreciation of the baht would impact Thailand's exports and economic growth. The Reuters survey is focused on what analysts 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. The figures included positions held through non-deliverable forwards (NDFs).