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Investors bearish on most Asian currencies as U.S. yields climb: Reuters poll

Reuters 

By Rushil Dutta

(Reuters) - turned bearish on most Asian currencies in the past two weeks as surging U.S. bond yields pushed the dollar higher, a poll showed, with short positions in the Indian Rupee at the highest level in 9 months.

The yield on the 10-year paper breached the 3 percent level earlier this week and is currently hovering around 7-year highs on signs the U.S. is on stronger footing in the second quarter.

That kept the greenback supported, with the U.S. dollar index up 0.7 percent so far this week, pressuring Asian currencies and other emerging market assets.

Bearish bets on the Indian rupee climbed to their highest level since August last year, the poll of 10 respondents showed, with sentiment further soured by rising oil prices, which will add to the country's already widening trade deficit.

The rupee strengthened 0.2 percent against the dollar on Thursday, but has shed nearly 6 percent so far this year, owing to India's perennial current account and fiscal deficit problems.

also upped their short positions on the Indonesian rupiah, the poll showed, with bearish bets at their highest since October 2015.

The rupiah has weakened about 3.6 percent so far this year and the outlook remains bleak.

This week, posted its biggest trade deficit in four years as imports surged in April, surprising analysts who had expected a surplus.

Indonesian stocks and bonds have been among the worst hit in by worries of capital flight as U.S. yields creep up.

Analysts believe that confluence of factors will pressure the central to raise interest rates later on Thursday in a bid to stabilise its financial markets, despite mild inflation and slower-than-expected growth in Southeast Asia's biggest in the first quarter.

Meanwhile, bullish bets on the Malaysian ringgit have reversed after the opposition's shock election win last week.

Some analysts have raised concerns that Mahathir Mohamad's populist promises could weigh on the government's fiscal position.

"Overall, the populist measures of the new government would steer the from investment towards consumption," DBS said in a note.

DBS believes the ringgit will depreciate to 4 to the dollar next month. It currently trades at 3.968.

"Amidst slower exports this year, the will not repeat last year's stellar 5.9 percent growth and slow to 5 percent this year," DBS added.

Bearish bets on the Philippine peso and Taiwan dollar also intensified while positions in the Singapore dollar turned from nearly neutral to bearish.

"I think once we see markets getting used to 10-year bond yields above 3 percent and once the U.S. dollar really starts to run out of momentum, we should see some recovery in Asian currencies in the second half of the year," said Khoon Goh, Head of Research for

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 U.S. dollars.

The figures include positions held through non-deliverable forwards (NDFs).

(Reporting by Rushil Dutta; Additional reporting by and in Bengaluru; Editing by Kim Coghill)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, May 17 2018. 13:16 IST
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