Analysts Increase Bets on Asian Currencies

By Roushni Nair

(Reuters) – Analysts have raised bullish bets on most Asian currencies following mixed data that raised concerns about economic growth in the U.S., leading to increasing odds of significant interest rate cuts and diminishing the appeal of the U.S. dollar.

Long bets on the South Korean won and Singapore dollar, the region’s top performer this year, have surged to their highest since January 26, 2023, while bearish bets on the Indian rupee were unchanged, a biweekly poll of analysts revealed on Thursday.

Singapore remains one of the few countries globally with a triple-A sovereign credit rating, reflecting its strong fiscal and external balances, making it a safe haven for investors.

The Indian rupee’s low value relative to the dollar is attributed to efforts by the Reserve Bank of India (RBI) to manage the exchange rate through foreign currency purchases to bolster reserves over the past decade, according to analysts at ANZ.

ANZ analysts noted that RBI’s interventions resulted in increasing FX reserves, low exchange rate volatility, and effective use of currency forwards to align FX interventions with domestic liquidity conditions.

The dollar’s 5% gain against key currencies in the first half of the year has diminished as market expectations tilt towards aggressive interest rate cuts. Data showed U.S. job openings plummeted to a 3-1/2-year low in July, signaling easing labor market tensions, as reinforced by statements from San Francisco Fed President Mary Daly calling for rate cuts.

Traders now see a quarter-point reduction in the Fed’s September meeting as more likely, with a 49% chance of a 50-basis-point cut, up from 41% prior to recent data, based on rate futures.

In addition, bullish bets on the Chinese yuan and Thai baht have risen to their highest since February 9, 2023, while analysts maintain their positive outlook for the Indonesian rupiah, Philippine peso, and Malaysian ringgit.

The Asian currency positioning poll focuses on 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 Thai baht.

The poll uses a scale of net long or short positions ranging from -3 to +3, where +3 indicates a significantly long position on U.S. dollars. Positions held via non-deliverable forwards (NDFs) are included in the findings.

Survey Findings

The survey findings, detailing positions in U.S. dollars versus several currencies, are as follows: