Asia FX sentiment improves on back of Fed's cautious stance

Sentiment towards most emerging Asian currencies improved in the past two weeks, as the dollar retreated after the US Federal Reserve's latest interest rate guidance was less "hawkish" than some expected. Bullish bets on the Indian rupee rose to the highest since May 2014, while investors' long positions in the Thai baht were estimated to be the biggest since April 2013.
Earlier this week, the rupee had risen to its highest level since October 2015 at 65.21 per dollar, having gained a boost after Prime Minister Narendra Modi's ruling party won a landslide victory in Uttar Pradesh state election, bolstering hopes for more economic reforms. Bets on the Chinese yuan turned slightly bullish. Although the long positions in the yuan were estimated to be small, it was still the most upbeat that investors have been on the yuan since April last year.
The improvement in sentiment toward Asian currencies came after the Fed raised interest rates as expected last week while sticking to its outlook for three rate hikes in 2017, instead of the four some market players were expecting. US bond yields fell after the Fed's meeting last week, bolstering investors' appetite for risky assets and gave a lift to most emerging Asian currencies.
Long positions in the South Korean won, Taiwan dollar, Singapore dollar all rose to the highest since August last year. Bullish bets on the Indonesian rupiah increased to the most since late September. The poll of 16 traders, analysts and fund managers showed that bearish bets against both the Malaysian ringgit and the Philippine peso, shrank compared to two weeks ago.
The Asian currency positioning 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. The figures include positions held through non-deliverable forwards (NDFs).