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Asia FX sentiment improves on changed U.S. rate hike views; yuan, rupee bullish: poll
October 15, 2015 / 1:50 PM / 2 years ago

Asia FX sentiment improves on changed U.S. rate hike views; yuan, rupee bullish: poll

SINGAPORE (Reuters) - Sentiment towards emerging Asian currencies improved in the last two weeks with views on China’s yuan and India’s rupee bullish, a Reuters poll showed, as expectations of a U.S. interest rate hike soon lost steam.

The yuan CNY=CFXS reported the first optimistic positions since early August, according to the survey of 20 fund managers, currency traders and analysts conducted from Tuesday through Thursday.

The renminbi on Monday hit its strongest level since China’s surprise Aug. 11 devaluation. The central bank often set its daily official guidance rate firmer as a part of efforts to stabilize the currency since the devaluation.

China also made a fresh push for the yuan to be included in the International Monetary Fund’s benchmark currency and argued that recent reforms put it closer to qualifying.

India's rupee INR=D2 reported the largest long positions since mid-April with sentiment on the currency turning positive as foreign investors in India aggressively bid for new limits on government bonds as well as for state debt. That indicated continued strong interest in a country with better economic fundamentals than many other Asian countries.

The Singapore dollar's SGD=D3 short positions shrank to the smallest since mid-May as the central bank on Wednesday eased monetary policy less than some had expected.

The city-state’s currency touched its strongest in more than two months as it found further support from data showing the economy barely avoided a recession in the third quarter.

Bearish bets on the Indonesian rupiah IDR=ID fell to the lowest since late November last year, thanks to capital inflows.

Last week, the rupiah jumped 9.2 percent against the dollar, the best weekly performance since July 2001, Thomson Reuters data showed. The Indonesian currency enjoyed inflows into the country’s stocks and bonds.

That came as investors sought higher yields in Asia on ebbing expectations that the U.S. Federal Reserve will raise interest rates this year, especially after disappointing U.S. September jobs data.

U.S. retail sales barely rose in September and producer prices reported their largest decline in eight months, raising doubts a Fed rate hike was imminent.

The minutes of the Fed’s September meeting showed that the U.S. central bank held off a long-anticipated rate increase to make sure that a global economic slowdown would not hurt the U.S. economy.

Some Fed officials including Governor Daniel Tarullo argued against a rate hike within this year amid the China-led global economic slowdown.

Those developments prompted investors to unwind bearish bets on most emerging Asian currencies, which they had built up on expectations of higher U.S. borrowing costs.

Sentiment on South Korea's won KRW=KFTC became nearly neutral, the best since late April, on demand from offshore funds.

The Bank of Korea on Thursday left its key interest rates at a record low unchanged, defying some expectations of a cut. It offered a cautiously optimistic view on the economy.

Bearish bets on the Malaysian ringgit MYR=MY and the Philippine peso PHP=PDSP slid to the lowest since May.

The Taiwan dollar TWD=TP the Thai baht THB=TH also posted the smallest short positions since late June.

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).

Additional reporting by Shaloo Shrivastava in BENGALURU; Editing by Richard Borsuk

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