Bullish bets on the Chinese yuan jumped to the largest since mid-January over the past two weeks while investors further increased their long positions on the South Korean won to the highest level in over two years, a Reuters poll showed. Currency market players remained optimistic about the outlook for most emerging Asian units on hopes that US politicians will reach a deal to avert a fiscal crisis and after recent data showed recoveries in the US and Chinese economies - Asia's major export markets.
Still, investors slightly reduced long positions in most other regional currencies earlier this month on caution over possible intervention by central banks to stem gains in their currencies. Highlighting such risks, South Korea dumped up to $1 billion worth of won on Thursday and warned of other measures in its strongest action in months to halt a rally in the currency that is heaping more on the country's struggling exporters.
The Reuters poll showed optimism of further gains in the won had grown in the last two weeks, with long positions on the currency at the highest since October, 2010. Earlier this week, the won's appreciation accelerated after Vice Finance Minister Shin Je-yoon said the country does not believe current market conditions demand new regulations to reduce risks from rapid foreign capital inflows.
That helped the South Korean currency hit a 14-month high to the dollar and a 16-month peak versus the yen. Long positions on the yuan rose by half, to its highest this year, according to the poll of 15 currency strategists conducted on Wednesday and Thursday. Despite efforts by the central bank to curb its strength, the yuan rallied to record highs last week on signs of a recovery in the world's second-largest economy and as domestic firms unwound dollar holdings.
OUTLOOK ON RUPEE WORSENS AGAIN Views on the Indian rupee, however, grew grimmer, with net short positions on the currency increasing by five times, as compared with two weeks ago. Bearish bets on the rupee have now climbed to the highest since late June, reversing the short trend of optimism seen after New Delhi announced reforms in September to attract foreign capital and reignite growth.
Long positions on the Philippine Peso, the best performing Asian currency so far in 2012, were slightly scaled back, according to the poll, but remained close to three-month highs. Expectations of strong domestic growth despite the global downdraft have propelled the currency nearly 7 percent higher this year, proving a headache for the country where exports make up almost two-fifths of economic output.
The Reuters survey focused on what analysts believe are the current market positions in nine Asian emerging market currencies: Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and 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 included positions held through non-deliverable forwards (NDFs).