January 12, 2017 / 9:33 AM / 6 months ago

Pessimism over Asia FX eases; yuan bearish bets at 3-month low after clampdown: Reuters poll

3 Min Read

A bank employee fills a form after counting stacks of old 1000 Indian rupee banknotes inside a bank in Jammu, November 25, 2016.Mukesh Gupta/Files

SINGAPORE - Sentiment towards most emerging Asian currencies improved in recent weeks, a Reuters poll showed on Thursday, with bearish bets against China's yuan falling to the smallest level in three months after Beijing clamped down on capital outflows and speculators.

Signs that the resurgent U.S. dollar was losing steam after a months-long rally have also offered some respite to emerging market currencies.

Bets on the Indonesian rupiah turned bullish for the first time since late October.

Bearish bets on five regional currencies fell, including the Singapore dollar, though it saw only a very slight decrease in short positions.

The improvement came in the wake of aggressive moves by Chinese authorities to shore up the yuan early in the new year after a 6.6 percent slide against the dollar in 2016.

In recent weeks, state banks have sold dollars and bought yuan and Beijing has tightened restrictions on capital outflows. In offshore markets, Chinese banks suddenly withheld funds, sending yuan borrowing costs in Hong Kong soaring and triggering a fierce short-squeeze.

The offshore Chinese yuan posted a record weekly rise last week, helping to steady onshore yuan levels, though most market watchers expect further depreciation later in the year.

The Taiwan dollar and South Korean won bucked the regional trend, however, with bearish bets against both increasing compared with the previous Reuters poll on Dec. 8.

The bulk of the 17 responses to the Reuters survey of FX analysts, fund managers and traders came before U.S. President-elect Donald Trump's news conference on Wednesday.

Trump, who takes office on Jan. 20, offered no details on his plans for infrastructure spending and tax cuts, disappointing dollar bulls and sending the greenback lower.

The 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 Masayuki Kitano; Additional reporting by Shaloo Shrivastava in BENGALURU; Editing by Kim Coghill

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