June 1, 2017 / 9:40 AM / 3 months ago

Bullish Asia FX bets rise; yuan sentiment strongest in two years: Reuters poll

FILE PHOTO - 100 Yuan notes are seen in this illustration picture in Beijing November 5, 2013.Jason Lee/File Photo

SINGAPORE (Reuters) - Investors increased their long positions in the Chinese yuan from two weeks ago to the largest in almost two years, a Reuters poll showed on Thursday, after the yuan rose due to the central bank's efforts to rein in depreciation expectations.

Investors were estimated to have increased bullish bets on most emerging Asian currencies compared with two weeks ago, after the dollar was weighed down by concerns about political turmoil in Washington.

Bullish bets on the Chinese yuan CNY=CFXS more than doubled from two weeks ago to the largest since late June 2015, according to the poll of 17 analysts, traders and fund managers.

The poll was conducted from Tuesday through Thursday. The bulk of the responses came before the yuan began to rally sharply on Wednesday.

The yuan surged 0.5 percent on Wednesday, its biggest one-day gain since Jan. 17, buoyed by views China's central bank is now less inclined to allow the currency to weaken markedly against the U.S. dollar.

Against that backdrop, the yuan has appreciated even after Moody's Investors Service last week downgraded China's credit rating and said it expects the economy's financial strength to erode in coming years.

On Thursday, the yuan extended its gains and touched a peak of 6.7878 per dollar, its strongest level since Nov. 9. This happened, after China's central bank pushed the reference rate up by 0.8 percent, the midpoint's second largest one-day appreciation since the yuan was de-pegged from the dollar in 2005.

Also in the poll, long positions in the Thai baht THB=TH THB=D3 rose to the highest since April 2013. The baht recently touched 22-month highs roughly around 34.00 per dollar.

The rise in the baht has raised concerns among Thai policymakers. Thailand's central bank said it will hold a news conference on foreign exchange regulation reforms on Monday, as policymakers remain focussed on tamping down a strong baht.

Bullish bets on the Malaysian ringgit MYR= rose slightly and reached the largest since April 2016, amid signs that foreign portfolio investors are coming back to Malaysia's bond markets - six months after many revolted against the central bank's crackdown on the offshore ringgit market.

Underscoring the general improvement in sentiment toward Asian currencies, long positions in the Singapore dollar SGD=D3 rose to the highest since March 2016.

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 Masayuki Kitano and Shaloo Shrivastava in BENGALURU; Editing by Richard Borsuk

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