Samir Manekar
(Reuters) – Analysts strengthened their bearish stance on most Asian currencies as higher U.S. interest rates and a stronger dollar are likely to continue to hurt local currencies, a Reuters poll showed on Thursday.
The Indonesian rupiah and Philippine peso were the most shorted currencies in the region, with bearish bets on both currencies at multi-week highs, a biweekly survey of 10 analysts showed.
The responses came ahead of May’s U.S. inflation report, which showed prices held steady, and ahead of the Federal Reserve’s monetary policy meeting, at which the central bank delayed the start of rate cuts until December. However, investors in contracts linked to the Fed’s benchmark rate maintained their bet for a quarter-percentage point cut in September and December.
“We continue to see upside risks to the DXY index (), given that we remain in an uncertain transition period regarding inflation (in the US) and markets may remain cautious,” Maybank analysts said on Thursday.
“The Fed staying higher for an extended period of time will also not do Asian currencies any favors as the dot plots now only point to one decline this year.”
The Indonesian rupiah, one of the region’s worst-performing currencies this year, has seen analysts increase their short bets throughout the year as external factors and corporate dividend outflows weigh on the currency.
“We are more skeptical on the THB (baht) and IDR (rupee) in the near term due to continued dividend outflows,” HSBC analysts said.
“While the IDR remains under pressure – which is highly likely in the short term given dividend outflows until the end of July, a narrowing trade surplus and lack of portfolio investment inflows – we cannot rule out further rate hikes by BI (Bank Indonesia).”
Short rates on the Philippine peso rose as the local central bank remains of the view that interest rates could be cut as early as August despite rising inflation.
“A rate cut signal to the Fed will likely lead to increased pressure on PHP,” HSBC analysts said.
Meanwhile, analysts are bearish on the Indian rupee, one of the region’s best-performing currencies this year, as external factors such as high interest rates and geopolitical tensions in the Middle East weigh on the currency.
Bearish sentiment also increased on the South Korean won, Taiwan dollar and Singapore dollar, but fell slightly on the Chinese yuan and Thai baht.
The Asian Currency Positioning Survey focuses on what analysts and fund managers believe is the current market position of nine Asian emerging market currencies: Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit. and Thai baht.
The survey uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates there is a significant long position in US dollars in the market.
These figures include positions occupied by non-deliverable forwards (NDF).
The survey results are presented below (positions in US dollars against each currency):
DATE
June 13-24 0.95 0.87 0.62 1.22 0.64 0.37 1.00 1.23 0.92
May 30, 24 1.05 0.72 0.33 0.94 0.53 0.00 0.81 1.19 1.00
May 16, 24 1.05 0.96 0.35 0.96 1.02 0.39 1.23 1.29 1.00
May 2, 24 1.25 1.61 0.89 1.39 1.40 0.49 1.46 1.44 1.39
April 18-24 1.25 1.59 0.80 1.32 1.24 0.43 1.42 1.19 1.28
April 4, 24 1.18 1.09 0.42 1.13 1.17 0.00 1.15 0.62 1.35
03/21/24 0.92 0.82 0.33 0.60 0.92 -0.54 1.12 0.47 1.13
03/07/24 0.84 0.54 0.25 0.53 0.64 -0.59 1.14 0.52 1.05
February 22-24 0.70 0.40 0.20 0.20 0.70 -0.40 1.30 0.30 1.10
February 8, 24 0.40 0.39 0.41 0.40 0.32 -0.17 1.07 0.28 0.72