Sentiment towards most emerging Asian currencies turned bearish over the last two weeks, largely due to concerns about slowing global growth, a Reuters poll showed on Thursday. The South Korean won saw the largest short positions since early March after enjoying bullish bets in nearly two months, according to the survey of 20 fund managers, currency traders and analysts conducted from Tuesday through Thursday.
The won has lost 2 percent against the US dollar so far this month amid growing expectations that the Bank of Korea will cut its policy interest rate in June or July to boost sluggish growth, even though it is expected to keep settings unchanged at its meeting this week. Bearish bets on the China's yuan rose to the largest since mid-February, survey found, on worries that a strong pick-up in March economic activity may not be sustainable. Data released so far for April and weak factory activity surveys have painted a more subdued picture.
Rising Chinese corporate debt has also added to worries about economic and financial stability. Sentiment toward the Malaysian ringgit also turned bearish, with pessimistic bets on the currency the largest since early February. Disputes between troubled state fund 1Malaysia Development Berhad (1MDB) and Abu Dhabi state-owned International Petroleum Investment Co (IPIC) intensified on Wednesday, with IPIC saying there was a fresh default by 1MDB.
The ringgit was the worst-performing Asian currency in the second quarter with a 3.0 percent loss against the dollar, Thomson Reuters data showed. Sentiment on the Philippine peso turned slightly more bearish on uncertainty over the new government's economic policies, even though the currency initially rallied after rough-talking city mayor Rodrigo Duterte won presidential elections on Monday. Investors are hoping Duterte will keep the current government's pro-business economic policies.
The president-elect will pursue annual economic growth of 7-8 percent, or even higher, in a drive to cut poverty, his spokesperson said on Wednesday. The peso has underperformed its Southeast Asian peers with a 0.9 percent gain so far this year despite the post-election rally. Views on the Taiwan dollar turned pessimistic with bearish bets the highest since mid-February.
Foreign investors were net sellers in the local equity market every day so far this month, dumping a combined net T$75.5 billion ($2.3 billion), which would be the largest since June last year, the Taiwan Stock Exchange data showed. The island's exports in April fell for the 15th straight month after the economy shrank more than expected in the first quarter, cementing expectations of more rate cuts in coming months. Reflecting pessimism in the region, bullish bets on Indonesia's rupiah and India's rupee fell.
Overall sentiment towards emerging Asian currencies had been optimistic since mid-March on expectations that the US Federal Reserve may not hurry to raise interest rates. 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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