Bearish bets on most Asian currencies slackened over the last two weeks, a Reuters poll showed, as a plunge in oil prices benefited the region's major crude importers, India and to a lesser extent Indonesia and the Philippines. More short positions were unwound in the Indonesian rupiah than in other regional currencies, a poll of 12 respondents showed. Short rupiah positions were at their lowest since early September.
The poll was conducted before Indonesia unexpectedly raised its policy interest rate on Thursday, when most analysts had predicted it would be left unchanged. Indonesia's surprise trade surplus in September had improved sentiment toward the rupiah after the currency hit its weakest levels since the 1997-98 Asian financial crisis back on October 10. Bearish bets on the Indian rupee, Asia's worst performing currency this year, and Philippine peso declined to their lowest since late August.
"If oil remains low, we may see rupee outperforming compared to other EM currencies and vice versa," said Anindya Dasgupta, head of local market trading at Barclays Bank PLC in Mumbai. India's easing retail inflation and recent reports that tensions were easing between India's central bank and the government had also offered the rupee some respite. The Philippine central bank also raised its benchmark interest rate by 25 basis points on Thursday, its fifth hike this year. It said further policy tightening was needed to curb inflationary pressures.
Bearish bets against the Chinese yuan fell slightly. The yuan has been hovering near the critical seven-to-a-dollar mark. The People's Bank Of China is expected to exercise its administrative powers to stem further outflows, but the yuan could come under more pressure if the psychologically significant level is breached. Market participants were keenly waiting to see whether talks between China's President Xi Jinping and US President Donald Trump could lead to a de-escalation in the Sino-US tariff war, when they meet during a Group of 20 gathering in Argentina later this month.
Any reduction in trade tensions would be positive for regional currencies. Short bets in the Taiwan dollar and Korean won saw some reduction, while participants in the poll increased short positions in the Malaysian ringgit to its highest since February. Bearish positions on the Singapore dollar rose to their highest levels since September. The Reuters survey is focused on what analysts 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.
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