Longs pile on Chinese yuan, Asian bulls maintain momentum: Reuters poll by Reuters

By Archishma Iyer

(Reuters) – Bullish bets on the Chinese yuan strengthened after a base of stimulus measures led global investors to reallocate funds to Asia’s biggest economy, while long positions in most other emerging Asian currencies were in largely stable, a Reuters poll showed on Thursday.

Long positions on the Chinese currency hit their highest level since late January 2023, with analysts maintaining their bullish outlook on the yuan for the fifth consecutive iteration of the five-year survey.

Investors began rushing into China’s previously battered financial markets after the country announced a series of initiatives including interest rate cuts and a $114 billion war chest to boost share prices.

“The stimulus came as a surprise and was bigger than expected given the already low base. There is a positive trend in the Chinese yuan, so USD/RMB could fall in the coming months and USD/Asia could fall in the medium term,” said Parisha Saimbi, an FX EM Asia strategist at BNP Paribas (OTC: ).

An outsized 50 basis point rate cut by the US Federal Reserve last month also helped emerging Asian currencies post gains.

However, a short-term consolidation is expected as “some Asian long FX positions are stretched, particularly in the Malaysian ringgit and Thai baht,” according to Jeff Ng, head of Asia Macro Strategy at SMBC.

Investors will look forward to a key US jobs report on Friday to gauge whether the Fed will head for another excessive rate cut in November, although the likelihood has narrowed.

Markets are pricing in a one-in-three chance of a 50-basis-point cut, down from 49.3% last week, according to CME’s FedWatch tool.

Analysts maintained their long positions, albeit slightly lower, in the South Korean won, Indonesian rupiah, Malaysian ringgit and Philippine peso.

The central banks of Indonesia and the Philippines have begun their interest rate cut cycles, and the Bank of Korea is expected to act in tandem as growth concerns continue to linger.

Meanwhile, analysts slightly increased bullish bets on the Singapore dollar and Thai baht, with the latter lingering near its early 2023 peak.

Singapore’s central bank will hold its biennial policy meeting later this month, where analysts expect the policy setting to remain unchanged. The local currency has remained a favorite among investors as lower inflation and steady economic growth have bolstered the city-state’s appeal.

Analysts have become slightly optimistic about the Indian rupee for the first time since the end of March.

The Asian Currency Positioning Survey focuses on what analysts and fund managers believe are the current market positions in nine emerging Asian currencies: the Chinese yuan, the South Korean won, the Singapore dollar, the Indonesian rupiah, the Taiwan dollar, the Indian rupee, Philippine peso, Malaysian peso. ringgit and Thai baht.

The survey uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates that the market is significantly long in US dollars.

The figures include positions held through non-deliverable forwards (NDFs).

The survey results are shown below (positions in US dollars against each currency):

DATE

03-Oct-2024 -1.14 -0.79 -1.26 -1.08 -0.59 -0.04 -1.18 -0.7 -1.45

19-Sept.-2024 -0.67 -0.9 -1.12 -1.18 -0.66 0.33 -1.3 -1.1 -1.33

05-Sept-24 -0.85 -1.09 -1.26 -1.05 -0.77 0.21 -1.46 -1 -1.22

22-Aug-24 -0.62 -0.93 -1.08 -1.26 -0.7 0.21 -1.57 -1.03 -1.16

08-Aug-24 -0.02 0.05 -0.61 -0.02 0.59 0.6 -0.78 -0.29 -0.57

25-Jul-24 1.07 0.79 -0.33 0.35 0.86 0.12 0.39 0.43 0.02

11-Jul-24 1.05 0.87 0.06 0.73 0.68 0.22 1.03 0.86 0.51

27-Jun-24 1.34 1.28 0.8 1.49 0.88 0.46 1 1.37 0.91

13-Jun-24 0.95 0.87 0.62 1.22 0.64 0.37 1 1.23 0.92

30-May-24 1.05 0.72 0.33 0.94 0.53 0 0.81 1.19 1