Investors increased bearish bets on most emerging Asian currencies in the last two weeks after Federal Reserve officials kept open the possibility of an interest rate hike in 2015 and as worries of a global economic slowdown lingered. Short positions in the South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Malaysian ringgit, Philippine peso and the Thai baht all rose to the largest levels since early September.
Persistent worries of a slowdown in Chinese and global growth have weighed on share markets round the world and dampened risk sentiment in the past couple of weeks. The lingering possibility of a Fed rate hike later this year has also weighed on Asian currencies. Federal Reserve Chair Janet Yellen had said last week that she expects the US central bank to begin raising interest rates later this year as long as inflation remains stable and the US economy is strong enough to boost employment.
The ringgit and the rupiah both plumbed 17-year lows earlier this week, while the Singapore dollar set a six-year low and the Thai baht hit its lowest level in more than eight years. Bearish bets on the Singapore dollar nearly doubled, as the currency faces headwinds from expectations that the Monetary Authority of Singapore will ease monetary policy in mid-October.
There were also relatively large increases in short positions in the South Korean won and the Taiwan dollar. Meantime, investors trimmed bearish bets against the Chinese yuan to the lowest level since early August. Investors have turned bearish on the yuan in the wake of China's surprise currency devaluation in August, having been bullish previously. The yuan, however, has stabilised over the past few weeks, buoyed by suspected currency intervention by China's central bank.
Besides the yuan, investors also pared bearish bets on the Indian rupee to the smallest level in two months. Indian share markets rose after the Reserve Bank of India cut its policy interest rate to a 4-1/2 year low of 6.75 percent on Tuesday, in a bigger-than-expected move that could help turn around an economy that has been slowing down. The 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.