Sentiment toward emerging Asian currencies improved in the last two weeks as the Chinese yuan stabilised and as the US Federal Reserve is expected to keep interest rates low for some time, a Reuters poll showed on Thursday. Bearish bets on the yuan fell to the lowest since late February, when sentiment on the currency started to sour, according to the survey of 13 analysts conducted on Wednesday and Thursday.
The renminbi has gained strongly this week, showing signs of reversing a four-month slide. Traders questioned whether the recent gains were a signal that the central bank had switched its stance to gently supporting the currency after aggressively driving it lower this year to deter speculators from thinking it was a one-way appreciation bet.
The poll also showed long positions in the Singapore dollar hit the highest level since September 2012. The city-state's currency is often used as a proxy to bet the yuan's moves. Bullish bets on the South Korean won and the Taiwan dollar reached their highest levels since January 2013. The South Korean currency hit a near six-year high this week as foreign investors snapped up the country's financial assets, especially bonds, and on demand from exporters for settlements.
Caution increased over possible intervention by South Korea's foreign exchange authorities to stem the won's appreciation. However, the authorities have not been aggressively intervening, local traders said. The Taiwan dollar also gained on inflows of foreign financial institutions.
Sentiment on the ringgit was the most optimistic since May last year as the Malaysian currency rose on the yuan's rebound. Long positions in the Philippine peso touched a six-month high on stock inflows and as the central bank is expected to raise reserve requirements later on Thursday. Bullish bets on the Indian rupee also increased on equity inflows, while investors stayed cautious ahead of the conclusion of general elections next week.
In the previous survey, sentiment on emerging Asian currencies had deteriorated on sustained weakness in the yuan. Meanwhile, short positions in the Thai baht rose slightly on increasing political unrest. On Wednesday, a Thai court ordered Prime Minister Yingluck Shinawatra to step down after finding her guilty of abuse of power, prolonging a political crisis that has led to violent protests and brought the economy close to recession.
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 PHP=PDSP, 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 US dollars. The figures included positions held through non-deliverable forwards (NDFs).
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