According to a poll conducted by Reuters, bearish bets on emerging Asian currencies have eased on the hopes that monetary tightening will cool the red-hot inflation that has been plaguing the region. In particular, short bets on the Thai baht have fallen sharply following the first rate hike in the country in nearly four years.
According to the results of a biweekly survey conducted by 12 financial analysts, short positions on all emerging Asian currencies decreased, with bets on China's yuan reaching their lowest level since late April.
Short bets on the Singapore dollar, the Indonesian rupiah, and the Philippine peso all dropped to multi-month lows.
The fact that the United States' inflation rate remained unchanged in July, marking the first significant sign of relief after a prolonged period of rising prices, also contributed to an improvement in the mood throughout the region.
After the Bank of Thailand (BoT) raised its interest rate by 25 basis points on Wednesday, short bets on the Thai baht dropped to their lowest level since the beginning of June. This marked the beginning of Thailand's tightening cycle, which had lagged behind that of its regional peers.
As tourists have started to return to Thailand, the country's economy has begun to show signs of a gradual recovery, which has made it possible for the Bank of Thailand to adjust its monetary policy. Thailand is highly dependent on tourism.
The majority of analysts anticipate that the BoT will maintain its gradual normalization of monetary policy throughout the remainder of the year.
Since the beginning of this month, the value of the baht has increased by nearly 4%, making it one of the currencies in the poll for which there is the least amount of short interest.
The first seven months of the year witnessed a decline of 10.2% in the value of the currency.
After the announcement that the Thai central bank was going to raise interest rates, most people responded to the poll.
The Indonesian rupiah was also found to be among the least shorted currencies. This is due to the fact that although the economy of the country is continuing on its path to recovery, rising inflation and the possibility of a global recession have led to calls for the Bank of Indonesia (BI) to raise interest rates.
Indonesia, the country with the most populous economy in Southeast Asia, is one of the last countries in the region to continue its lax monetary policy from the pandemic era.
Analysts at Citi and OCBC are anticipating that BI will raise its benchmark seven-day reverse repurchase rate during a meeting that will take place later this month. Citi's analysts are anticipating a 25 basis point increase in the rate.
On the other hand, Maybank and ANZ do not anticipate the central bank acting hastily to tighten monetary policy.
In other financial news, the number of short bets placed on the Indian rupee, the South Korean won, and the Taiwan dollar fell to its lowest level since April 21.
The current market positions in nine Asian emerging market currencies are the focus of the Asian currency positioning poll. These currencies are the Chinese yuan, the South Korean won, the Singapore dollar, the Indonesian rupiah, the Taiwan dollar, the Indian rupee, the Philippine peso, the Malaysian ringgit, and the Thai baht.
The estimates of net long or short positions on a scale ranging from minus 3 to plus 3 are used in the poll. The market is extremely long on U.S. dollars if it has a score of plus 3, as indicated by this score.
These numbers take into account positions that were held through non-deliverable forwards (NDFs)
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