Investors bullish Asia; long yuan positions at near three-year highs

Investors positioned themselves for further gains in Asian currencies against the dollar on expectations the US currency will soften further in the coming months, a Reuters Poll showed on Thursday. The dollar index, which tracks the greenback against a basket of currencies, has fallen about 8.9 percent this year on issues such as escalating tensions between the United States and North Korea, worries over President Donald Trump's ability to deliver on his proposed economic reforms, and Federal Reserve policy.
Uncertainty over the dollar may explain why investors have raised their long positions on most Asian currencies, as shown in the Reuters poll of 13 analysts, traders and fund managers. Bullish bets on the Chinese yuan were maintained at three-year highs. The currency has gained about 4.1 percent this year, underpinned by the central bank's guidance of the daily trading band and controls on capital outflows.
Investors remained positioned for the Indian rupee to gain against the dollar. The rupee has been underpinned by foreign inflows into the country's equities on expectations of easier monetary policy and improving economic growth. The rupee has gained about 5.7 percent against the dollar so far in 2017. Investor positions on the Thailand baht were also bullish. Thailand's economy grew at its fastest for more than four years in the second quarter of 2017, thanks to stronger exports and tourism in a recovery that is gaining momentum.
On the other hand, bearish positions in the Philippine peso rose to more than 9 month highs. The peso hit an 11-year low against the dollar earlier this month, extending a more than 2-month slide caused by the country's rising trade deficit.
A government-driven infrastructure drive has seen a surge in capital goods imports in the Philippines, and accounted for a sizeable portion of a $13.2 billion trade deficit in the first half of the year, putting the country on track for its first annual current account deficit in 15 years. Long positions on the South Korean won fell to their lowest in more than a month, as political tensions between the United States and North Korea took their toll.
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.