Short positions on most Asian currencies rose over the last two weeks, a Reuters poll showed, as global trade tensions and strength in the U.S. economy hinted at further outflows from emerging markets.
Sino-U.S. trade tensions reached a head earlier this week after reports that the United States would impose further tariffs on Chinese goods, driving investors further away from riskier assets.
Safe-haven buying led the dollar to its seventh consecutive monthly gain in October, cementing its status as the blue-eyed investment destination of the world. The greenback was also helped by robust economic data from the U.S.
Growth in bearish bets on the Thai Baht outpaced that of regional peers, a poll of 10 respondents showed, as a manufacturing slowdown and a lowered export outlook sowed concerns about the country's economy.
Chang Wei Liang, an FX strategist at Mizuho Bank in Singapore, said he still leaned towards a BoT (Bank of Thailand) rate hike by the end of the year, but appreciation in the baht will be affected if the export performance languishes.
Short bets on the Chinese yuan rose to their highest since early August against the backdrop of slowing domestic and external demand for China's produce, indicating deepening cracks in the world's second largest economy. China's factory production slowed down in October. While pledges of support from Chinese regulators have occasionally injected a measure of cheer in regional circles, the yuan still bled out against the dollar in October, marking its longest monthly losing streak since the exchange rate was unified in 1994.
The yuan has been closing in on a psychologically important level of 7 to the dollar. Market participants have posited further outflows for the currency if the level is breached.
The People's Bank Of China is expected to wield administrative measures to push the yuan away from the level.
Short positions on the Indian rupee and the Philippine peso retreated slightly as investors factored in softening oil prices. The countries hold large oil bills, and any fall in prices is a source of respite.
The rupee's sensitivity to oil prices has been exacerbated by India's large current account deficit and the currency has underperformed its Asian peers by a wide margin this year, owing to a spike in oil prices earlier.
However, the rupee was battered on Wednesday after reports that India's central bank governor would resign over differences with the government.
"Given the fact you have this very public fight going on between the government and the RBI, traders will be lot more cautious in turning short USD/INR," said Mizuho's Chang.
Bears on the Indonesian rupiah held at their highest level in five years. Sentiment for the rupiah has seen some improvement after Indonesia logged a current account surplus in September.
A depreciating rupiah had prompted several measures from the government to curb imports, which remain a closely watched metric for investors in the country.
Relative stability in the currency had backed the central bank's decision to keep its benchmark interest rate steady last week, after a series of consecutive hikes.
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 on 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):
DDMM CNY KRW SGD IDR TWD INR MYR PHP THB
1/11 1.37 0.99 0.75 1.69 0.82 1.37 0.89 1.07 0.53
18/10 1.14 0.82 0.49 1.68 0.60 1.68 0.75 1.36 0.07
4/10 1.11 0.56 0.70 1.65 0.65 1.74 0.74 1.53 0.10
20/9 1.12 0.79 0.95 1.57 0.69 1.72 0.82 1.44 0.33
6/9 0.92 0.64 0.86 1.37 0.68 1.72 0.90 1.13 0.24
23/8 0.93 0.71 0.84 1.27 0.91 1.19 0.88 0.86 0.47
9/8 1.52 0.94 0.80 1.21 0.99 1 0.86 1.02 0.66
26/7 1.55 1.08 0.84 1.35 1.13 1.25 0.76 1.44 0.87
12/7 1.00 0.91 0.68 1.31 0.88 1.18 0.64 1.35 0.70
28/6 1.28 1.03 0.94 1.32 1.03 1.43 0.94 1.58 0.73