Yuan short positions near 5-year high, Asia forex sentiment worsens

Rupee attracts largest long positions in nearly two months

Short positions on China's yuan hit a near five-year high in the last two weeks as the central bank cut interest rates, adding to a flurry of regional policy easing which is dampening sentiment toward most emerging Asian currencies, a Reuters poll showed on Thursday.

India's rupee, however, attracted the largest long positions in nearly two months as the central bank slashed its policy interest rate, boosting hopes of more stock inflows, according to the survey of 18 currency analysts and traders conducted between Tuesday and Thursday.

Short positions in the yuan rose to the highest since April 2010, when Reuters started including the Chinese currency in a survey of market positioning in emerging Asian currencies.

Earlier this week, the renminbi fell to its lowest since October 2012 after China's central bank on Saturday cut interest rates and as the authority guided the currency weaker by fixing its daily midpoint softer.

The outlook on the yuan remains gloomy as the People's Bank of China is expected to ease monetary policy further to support the world's second-largest economy.

China on Thursday announced an economic growth target for this year of around 7%, signalling its lowest rate of expansion for a quarter of a century, and said it would increase government spending to support the slowing economy.

The rate cuts in China and India bolstered expectations of further easing in the region to tackle slowing growth and deflationary pressure.

Sentiment on the Indonesian rupiah turned the most pessimistic since early October.

The rupiah on Thursday weakened past the psychological support level of 13,000 per dollar for the first time since the 1997-98 Asian financial crisis.

Indonesia's central bank governor said that the rupiah is in good condition and Bank Indonesia is not worried about its decline.

The currency is the worst-performing Asian currency so far this year. Slower-than-expected inflation in February reinforced expectations that the central bank may cut interest rates further.

Bearish bets on the Singapore dollar also reached the highest since early December. The city-state's central bank is likely to ease monetary policy in April on more signs of a sluggish economy and weak inflation, a separate Reuters poll showed.

Short positions in the South Korean won and the Taiwan dollar hit two-month highs, while sentiment on Thailand's baht turned bearish.

By contrast, long positions in the rupee advanced to the largest since late January.

On Wednesday, the Reserve Bank of India slashed its key policy repo rate by 25 basis points to 7.5%, its second inter-meeting cut this year on the back of easing inflation and what it said was the "weak state" of parts of the economy.

The move sent local stocks to record highs and lifted government bonds to their highest in nearly 20 months.

The poll is focused on what analysts 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).