Optimism prevailed over emerging Asian currencies in the last two weeks with sentiment on China's yuan turning bullish, a Reuters poll showed, supported by expectations of an extended phase of easy monetary policies around the globe. The yuan was estimated to report small bullish bets for the first time since mid-April, according to the survey of 23 fund managers, analysts and currency traders conducted from Tuesday through Thursday.
That came as China's central bank set a series of firm daily guidance rates in a move to stabilise the currency. Chinese holdings of US Treasuries also dipped in June. Two weeks ago, bearish bets on the renminbi fell to its lowest in more than three months as shown by the previous poll published on August 4, as the People's Bank of China was spotted intervening to slow down the pace of its depreciation.
Recent dollar weakness has also helped the yuan rebound. The dollar came under pressure as the recent disappointing US economic data underlined expectations that the Federal Reserve will remain cautious on raising interest rates further. The Fed policymakers agreed that more economic data is needed before increasing interest rates although some see a need to tighten policy soon, the minutes of the US central bank's latest policy meeting showed. Other major central banks are expected to deliver further monetary stimulus, helping investors seek higher yields in emerging Asia.
As a result, most regional currencies reported largest long positions in multi years. Views around the South Korean won were the most optimistic among regional peers with its bullish bets highest since July 2014. The positive mood coincided with Standard & Poor's last week raising the country's sovereign rating, fuelling capital inflows. The Taiwan dollar reported the largest optimistic bets since February 2012 on equity inflows. Foreign investors bought a combined net T$57.9 billion ($1.8 billion) worth of the island's stocks in the first half of this month after posting the biggest inflows in a decade in July.
Thailand's baht posted the largest bullish bets since April 2013 on capital inflows. Adding to the optimism, the economy grew at its fastest annual rate in 13 quarters, above forecasts. The Indian rupee - one of the highest-yielding currency in Asia - saw the largest long positions since March 2015. Bullish bets on the Philippine peso grew to the largest in near five months.
Sentiment on the Malaysian ringgit turned optimistic, for the first time since late April, as the country saw bond inflows in July despite persistent concerns over scandal-plagued state fund 1Malaysia Development Berhad. 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. The figures include positions held through non-deliverable forwards (NDFs).