Yuan optimism hits 20-month high; Philippine peso sentiment sours

Long positions on the Chinese yuan rose to their highest level in 20 months in the last two weeks on views of a wider trading band, while sentiment on the Philippine peso turned bearish for the first time since June, a Reuters poll showed. Bullish bets on the yuan rose to its highest since late August 2011, according to a survey of 14 currency analysts published on Thursday.
The yuan surged to a record high earlier in the day after the central bank set its midpoint at the strongest level ever in response to the US dollar's steep fall in global markets. Traders increasingly expect Beijing to widen the currency's daily trading band despite official dismissal of such plans. A robust trade surplus and signs of hot money inflows despite recent data pointing to weaker-than-expected growth in the economy are seen contributing to market pressure for the currency's appreciation.
Sentiment towards the Philippine peso turned bearish for the first time since early June as the central bank continued to take steps to curb its appreciation. Earlier in the day, it reduced the rate on a peso short-term deposit scheme that is popular with both foreigners and local investors and used by the authorities to manage domestic market liquidity, as expected.
Meanwhile, bearish bets on the South Korean won were seen mostly removed in an indication that the unit may restart its upward spiral after a brief hiatus. South Korea's economy grew at its fastest pace in two years during the first quarter despite a weaker yen, although the outlook for the rest of the year stayed murky with consumers and exporters struggling for confidence.
Demand from offshore funds and exporters caused investors to cover short positions. The won has lost 3.7 percent to the dollar so far this year, becoming the worst performing emerging Asian currency, on concerns over its political tensions with North Korea and as the sharply weaker yen threatens South Korea's export competitiveness.
The poll also showed bullish bets returned on the Indian rupee for the first time in over a month, while sentiment on the Singapore dollar turned negative for the first time during the same period. Optimism on the Thai baht remained strong and long positions on the unit have now been consistently maintained since mid-July.