Bearish bets on Asian currencies firm as weak China growth weighs: Reuters poll

By Upasana Singh

(Reuters) - Investors increased bearish bets on most Asian currencies, as a stuttering post-pandemic recovery in China, the world's second-largest economy, weighed on sentiment, a Reuters poll showed on Thursday.

Bearish bets on Thailand's baht and the Malaysian ringgit rose to their highest since early November, while investors raised their short positions on the yuan, according to the fortnightly poll of 12 analysts.

The ringgit has been among the worst-performing currencies in the region this year, shedding about 5.8% so far.

The Malaysian currency remains tightly bound to the Chinese yuan, reflecting the country's strong trade links with China, analysts at ING said in a note.

The yuan has weakened 4.8% so far this year as weak consumer and private sector demand has sapped momentum from the post-pandemic recovery in China.

"China is in need of a credible economic recovery plan to boost the confidence of consumers and investors, and it is likely that the government will communicate that soon to revive animal spirits before the labour market conditions deteriorate further," said Fiona Lim, a senior FX strategist at Maybank.

"That is a key risk for investors, who are too bearish on Asian currencies."

Most of the responses to the poll were received after Chinese Premier Li Qiang said Beijing would take steps to boost demand and invigorate markets.

China's economic growth in the second quarter will be higher than the first and is expected to reach the annual economic growth target of around 5%, Li said.

Meanwhile, the baht's depreciation came as investors waited to see if the leading prime ministerial candidate has enough support to become the country's next premier.

Short positions were also increased on South Korea's won, the Singapore dollar, and Indonesia's rupiah.

Bearish bets on the Philippine peso eased to a more than two-month low, while analysts stayed bullish on the Indian rupee, the sole outlier in the pack.

"As we anticipate funds to flow back into EM (emerging) markets when the U.S. Fed no longer requires raising rates, we maintain our expectations that EM currencies will appreciate in the latter part of the year," analysts at MIDF Research said in a note.

Futures see a near 80% chance that the U.S. Federal Reserve will hike rates by 25 basis points in July, before holding rates steady for the remainder of the year. [FEDWATCH]

The Asian currency positioning 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 on U.S. dollars.

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

The survey findings are provided below (positions in U.S. dollar versus each currency):

DATE USD/ USD/ USD USD USD USD/ USD/ USD/P USD/T

CNY KRW /SG /ID /TW INR MYR HP HB

D R D

29-Jun 1.74 0.29 0.5 0.3 0.7 -0.1 1.85 0.29 1.03

-23 0 0 2 4

15-Jun 1.59 -0.0 0.1 -0. 0.6 -0.2 1.64 0.74 0.25

-23 3 7 33 8 4

01-Jun 1.88 0.68 0.7 0.2 0.7 0.48 1.77 1.08 0.45

-23 3 3 0

18-May 1.27 0.88 0.1 -0. 1 0.11 1.1 1.12 -0.5

-23 9 27

04-May 0.56 1.01 -0. -1. 0.6 -0.1 0.69 0.86 -0.43

-23 04 05 5 4

20-Apr -0.1 0.36 -0. -0. 0.3 0.30 0.54 0.95 -0.12

-23 4 13 47 0

06-Apr 0.04 0.56 -0. -0. -0. 0.3 0.29 0.08 -0.06

-23 39 26 03

23-Mar 0.17 0.87 0.1 0.7 0.6 0.58 0.74 0.36 0.37

-23 6 4 3

09-Mar 0.68 1.3 0.6 0.5 0.7 0.28 0.78 0.42 0.3

-23 5 6 8

23-Feb 0.36 0.77 0.2 0.1 0.3 0.80 0.49 0.33 0.37

-23 1 2 0