Investors have raised their long positions on most Asian currencies over the past two weeks, a Reuters poll showed, as the dollar continued to weaken on concerns a shift to hawkish stances by global central banks would cut the greenback's yield advantage.
The European Central Bank (ECB) is due to meet on Thursday to decide its deposit rate with higher interest rates in Europe expected to erode the attractiveness of higher yielding dollar denominated investments. The recent government shutdown in Washington D.C. also resulted in a weakening dollar and consequently, larger bullish bets in many Asian currencies.
The dollar index, which measures the dollar against a basket of six major currencies, slipped below the 90 mark and to its lowest in more than three years.
Among regional currencies, bullish bets on the Chinese yuan were raised to their highest since September 2010, according to the poll of 14 analysts, traders and fund managers. The dollar's weakness has seen the onshore yuan firm to its strongest since November 2015. China's gross domestic product grew 6.8 percent in the October to December period from a year earlier, better than the forecast of 6.7 percent according to a Reuters poll.
The People's Bank of China has consistently lifted the yuan mid-point over the course of the past week, resulting in the Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies, touching its highest since September 2017. Sentiment in the Malaysian ringgit was boosted to the strongest since March 2008 on expectations the country's central bank will raise interest rates.
Data released on January 24 showed the consumer price index rose 3.5 percent annually in December. Meanwhile, the Singapore dollar also saw bullish positions raised to their highest since September 2010. The Taiwan dollar also saw bullish positions at their highest since March 2008, helped by data showing export orders growing 17.5 percent for December, well ahead of expectations.
Bucking the bullish trend, the Philippine peso saw sentiment reverting to bearish territory from neutral. Investors have amassed short positions on the currency to an extent not seen since July 2015.
Data released on January 23 showed full year growth of the Philippine economy in 2017 slowing marginally to 6.7 percent, from 6.9 percent in prior year. Investors trimmed their bullish bets on the Korean won after the Bank of Korea's monetary policy board said it would maintain an accommodative policy. The poll was conducted between Tuesday and Wednesday with the bulk of the responses coming in by Wednesday.
The Asian currency positioning 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.