Sentiment towards most emerging Asian currencies improved with all of them seeing bullish bets for the first time in more than 1-1/2 years, a Reuters poll showed, after the Federal Reserve raised doubts about US rate hikes this year. Fed Chair Janet Yellen on Tuesday stressed the need to be cautious in raising interest rates, highlighting external risks such as low oil prices and slower growth abroad. The comments poured cold water on expectations that the US central bank could increase borrowing costs twice this year.
As a result, the dollar was on the course for its worst quarter in five years against a basket of major currencies. Investors also dumped dollar holdings against emerging Asian currencies to stop losses. All nine regional currencies now enjoy bullish bets for the first time since July 2014, according to a Reuters poll of 20 fund managers, currency traders and analysts conducted from Tuesday through Thursday. Sentiment on Asian currencies had begun improving two weeks ago on expectations the Fed would not hurry in tightening policy.
Views on China's yuan turned bullish, for the first time in more than five months, according to the latest survey. The renminbi was set to see its largest quarterly gain since July-September 2014 as the People's Bank of China set its daily guidance rates at its strongest this year. The Malaysian ringgit's long positions rose to their highest since May 2014 as rebounds in crude prices eased concerns over the country's oil and gas revenues, attracting capital inflows. That helped the ringgit post the largest monthly gain in March since September 1998.
The currency found further support from suspected demand linked to state fund 1Malaysia Development Berhad's sale of its power assets. Bullish bets on the South Korean won also jumped to the highest since July 2014 as the currency reported the largest monthly gain in seven years. Foreign investors added to South Korean bond holdings this month after heavily cutting them in February. They also increased their purchases of Seoul stocks.
The Singapore dollar's long positions hit their highest level since September 2012 ahead of the central bank's monetary policy review in April. The Monetary Authority of Singapore may keep its policy unchanged at its semiannual meeting next month with inflationary risks expected to pick up later in the year, a Reuters poll showed early March. Some economists said fiscal measures in the city-state's new budget reduced risks of monetary stimulus.
Sentiment toward the Indian rupee turned optimistic with long positions the highest since mid-October after foreign debt investment limits were increased. India's central bank said it would allow foreign investors to buy an additional 275 billion rupees in sovereign debt next month as part of its plan to gradually raise debt investment limits. The Taiwan dollar enjoyed its first bullish bets since May 2015 as monthly foreign stock buying in March hit the highest level in nearly nine years.
The 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 US dollars.
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