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Bears return to prey on rupee as Lok Sabha election euphoria fades: Poll

With the election done and dusted, inflows have tapered off, the central bank has cut interest rates for the third time this year and Fitch Ratings posited another 25 basis point cut in 2019.

Reuters 

Rupee, cash, money
Bets on the rupee turned bearish for the first time since late February, a poll of 14 respondents showed.

 shaved bearish bets on most Asian currencies over the past two weeks but went short on the for the first time in over three months, a Reuters poll showed, as election euphoria faded against the backdrop of slowing in

had turned bullish on the in March for the first time in nearly a year when billions of dollars worth of foreign poured into ahead of general election in the world's biggest democracy.

With the election done and dusted, inflows have tapered off, the central has cut interest rates for the third time this year and posited another 25 basis point cut in 2019.

"My base case on is that will slow this year and that it will weigh on the INR," SEB Chief EM Strategist Per Hammarlund told the Reuters Global Markets Forum on Wednesday.

Bets on the turned bearish for the first time since late February, a poll of 14 respondents showed.

"There is a relatively large risk/possibility that the new Modi administration kick-starts the reform agenda again. If they do, I think it is the only way that the INR can recover."

Prime Minister secured a second term after a landslide election victory last month, and the government's main think tank has hinted at 'big-bang' economic reforms to please foreign investors, unlock and prop up employment.

Short bets were trimmed for most other regional currencies on perceived weakness in the greenback as the U.S. Federal Reserve firmly leans towards policy easing. However, nervousness over the lingering U.S.-Sino trade war kept bullish bets in check.

Diplomatic talks were rekindled between leaders of the two countries on Wednesday, though most doubt a breakthrough deal will be reached when U.S. meets Chinese at the summit in Osaka next week.

All 13 participants in the poll were bearish on the Chinese yuan, cautioned by weak economic data following the drawn-out trade war saga.

Short bets on the South Korean won and the Taiwan dollar unwound slightly but stayed in bear territory. The U.S. scrutiny of Chinese companies has hurt demand for electronic parts that are a key export for these economies.

The Philippine peso saw bearish bets strengthen slightly, a poll of 12 respondents showed. The central banks of both and the are expected to announce their policy decisions later on Thursday.

The is seen cutting rates for the second meeting in a row, according to a Reuters poll that suggested it would be a close call as policymakers try to strike a balance between supporting growth and curbing inflation pressures.

A poll of 13 respondents showed bearish bets ease on the Indonesian rupiah. is expected to keep its benchmark interest rate steady, a Reuters poll showed.

The Thai baht has been the best performing regional currency this year and bucked the wider trend in this poll to see long positions strengthen. bet on its relatively strong economic fundamentals backed by strong exports, and local consumption.

The Reuters survey 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 included positions held through non-deliverable forwards (NDFs).

The survey findings ASIAPOSN are provided below (positions in U.S. dollar versus each currency):

 

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, June 20 2019. 12:40 IST
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