Bearish bets on China's yuan hit a near ten-month high in the last two weeks as the central bank guided it weaker to reflect a firm dollar, and sentiment towards most emerging Asian currencies stayed pessimistic with US interest rates expected to rise. The yuan's short-positions rose to the largest since early January, showed a Reuters poll of 21 fund managers, analysts and currency traders conducted between Tuesday and Thursday.
The yuan hit six-year lows in both onshore and offshore markets this week as the People's Bank of China set its daily guidance rates at the weakest levels since September 2010, in response to the dollar's recent strength. The yuan's weakness spurred concerns over capital outflows and raised speculation that Beijing may allow the currency to depreciate further to support the world's second-largest economy, although large state-run banks were suspected of intervening to slow the yuan's decline, traders said.
Chinese companies rushed to buy dollars for overseas investments and debt repayments. The greenback hovered around a nine-month peak against a basket of six major currencies as a recent series of solid US economic data and Federal Reserve top officials' hawkish comments reinforced expectations that the US central bank will raise interest rates in December.
Bearish positions in the Singapore dollar's rose to their largest since October last year, according to the survey. The city-state's currency slumped last week to its weakest level against the dollar since March 3 on bets that the central bank may ease monetary policy amid growing risk of a recession. The poll showed bearish bets on South Korea's won were their largest since late May as foreign investors continued to sell local bonds.
Sentiment toward most other emerging Asian currencies remained pessimistic though bearish bets eased a bit on the US dollar's recent retreat. The Thai baht's short positions more than halved on hopes for calm after some uncertainty following the death earlier this month of King Bhumibol Adulyadej, the world's longest-reigning monarch. Bearish bets on the Philippine peso were slightly reduced due to speculation that President Rodrigo Duterte's foreign visits would generate an inflow of business, despite diplomatic strains with the United States.
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).