Sentiment towards emerging Asian currencies improved on hopes of massive European Central Bank monetary stimulus and the yen's rebound, with traders putting their first optimistic bets on the Chinese yuan since early December, a Reuters poll showed on Thursday. Long positions in the Indian rupee rose to a seven-month high, according to the survey of 16 currency analysts and traders conducted between Tuesday and Thursday.
-- Rupee long positions largest since June
-- Ringgit short positions slightly lower
Traders remained pessimistic on most other emerging Asian currencies, but reduced their short positions in regional units, even including Malaysia's ringgit. Views on the yuan turned positive for the first time in about six weeks. The renminbi found support from better-than-expected economic data such as the fourth-quarter growth and December trade. The rupee, on which investors have been bullish since October, saw the largest optimistic bets since June. It has been the best performing Asian currency so far this month on capital inflows to India.
India's central bank on January 15 cut interest rates to cope with growing signs of slowing inflation and a flagging recovery. That lifted the country's stocks and bonds. Short positions in the ringgit slightly eased from two weeks ago, when its bearish bets hit the largest since August 2008, the global financial crisis. The Malaysian currency was the worst performing emerging Asian currency last year on fears that sliding oil prices would hurt the country's current account surplus and increase fiscal deficit.
The government on Tuesday widened its fiscal deficit target for 2015, cut growth forecast and reduced its budget to reflect lower oil and gas revenue. Fitch Ratings warned of a downgrade in the country's rating, sending the ringgit on Wednesday to a near six-year low. The Philippine peso reversed short positions as the currency hit a four-month high on capital inflows. Sentiment on South Korea's won and Thailand's baht became almost neutral.
Bearish bets on the Taiwan dollar and the Singapore dollar fell to the lowest since late October when investors were bullish on those units. Short positions in the Indonesian rupiah slid to the smallest since late November. Such improvements came as the ECB is widely expected to announce a new scheme to print money to buy euro zone government bonds later on Thursday to combat the threat of deflation and get the euro zone economy back on a steady footing.
A source told Reuters the ECB's Executive Board has proposed a quantitative easing program that would enable the bank to buy 50 billion euros ($58.0 billion) in bonds a month from March. The yen also advanced as the Bank of Japan held its monetary policy on Wednesday, causing some speculators who had expected more easing to cover short positions.
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. 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).