Asia FX bears retreat on receding expectations of US rate rise

Pessimism over emerging Asian currencies eased in the last two weeks as expectations of an imminent interest rate rise by the Federal Reserve waned after weak US jobs data, a Reuters poll showed on Thursday. The Chinese yuan's bearish bets nearly halved with the central bank suspected of intervening to shore up the currency, according to the survey of 21 fund managers, currency traders and analysts conducted from Tuesday through Thursday.
Still, sentiment on the renminbi was the most pessimistic among regional peers as recovery in the world's second-largest economy is still some distance off. On Wednesday, China's central bank cut its 2016 forecast for exports to a contraction of 1 percent from growth of 3.1 percent. South Korea's won saw smaller bearish bets despite a surprise central bank rate cut. The Bank of Korea defied market expectations with an unexpected cut in its policy rate to a record low of 1.25 percent.
Investors dumped the dollar to scramble for the recent underperforming won as the greenback lost ground after data showed US employers added just 38,000 jobs last month, the fewest in more than 5-1/2-years. Federal Reserve Chair Janet Yellen on Monday provided little clue on the timing of the next rate increase, although she gave a largely upbeat assessment of the US economic outlook and said tightening was on the cards.
US interest rate futures implied traders saw nearly no chance the Fed would increase rates at its two-day policy meeting ending next Wednesday, according to CME Group's FedWatch. That prompted investors to seek higher yields in emerging Asia. The Philippine peso posted its first optimistic bets in near two months on equity inflows as the incoming President Rodrigo Duterte, who won the May 9 election, has promised to boost infrastructure spending to keep the Southeast Asian country on track for growth. Views on the Indian rupee and the Singapore dollar turned almost neutral.
The Taiwan dollar's bearish bets shrank on equity inflows, while short positions in the Thai baht fell thanks to foreign demand for the country's stocks and bonds. 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.