Published by Himanshi Akhand
(Reuters) – Bearish bets on most Asian currencies climbed to multi-month highs as expectations of fewer US interest rate cuts this year continued to boost dollar demand, while The threat of US tariffs undermined the attractiveness of risky Asian assets, a Reuters poll showed on Thursday.
Short bets on the Chinese yuan rose to the highest level since June 2023, while those on the Malaysian ringgit and Indonesian rupiah hit a seven-month high, according to the fortnightly poll of 13 respondents.
The yuan, which has been trading near 16-year lows against the dollar, is seen as the most vulnerable to a stronger dollar and heavier tariffs under the administration of US President Donald Trump. Trump.
China is also Southeast Asia's largest trading partner and a weaker yuan could send ripples across regional currency markets.
Ahead of Trump's inauguration on January 20, markets have moved away from Asian assets as his policies of tax cuts, tax hikes and tighter immigration are likely to boost US prices, bond yields and the dollar .
In addition, the Federal Reserve's projection of two rate cuts for 2025, half of what was previously estimated, has led markets to fully price in just one 25 basis point (bp) rate. charged in 2025, with a 60% chance of premium. second reduction.
Higher US rates and the dollar's yield advantage could spur capital flows into emerging Asian markets and weaken their currencies.
“The external environment may limit how far central Asian banks can ease with Asia FX weakness seen since the start of the Fed's cut cycle,” DBS analysts said in a note.
The US central bank has cut rates by 100 bps since September.
DBS said there is a conflict in domestic and external priorities for central Asian banks and less exporting economies may see lower price flexibility.
Short positions on the Taiwan dollar were the highest since May 2024.
Bearish bets on the Indian rupee, which recorded its ninth straight weekly fall last week, were at their highest level since July 2022.
Short positions on the Singapore dollar were the highest since October 2022.
“While Singapore may be directly shielded from an increase in US tariffs, it would still be highly exposed to the indirect impact through slower global growth and spillovers from slower growth in -China trade,” Citi analysts said.
Citi's underlying case for the Monetary Authority of Singapore (MAS) to ease policy stance in January is due to recent deflationary trends and challenges to growth resilience.
South Korea is the current winner of the shortest Asian currency, according to the poll. They had posted their worst annual fall in 16 years in 2024 as government efforts to stimulate the market were overshadowed by signs of a slowdown in exports and domestic political turmoil.
The Asian Currency Situation Poll focuses on what analysts and asset managers believe are the current market conditions in nine emerging Asian market currencies: the Chinese yuan, South Korea 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 less than 3 to plus 3. A score of plus 3 indicates that the market is very long the US dollar.
The figures include positions held through non-deliverable forwards (NDFs).
The results of the survey are provided below (position in US dollars against each currency):
DATE
09-Jan-25 1.65 1.75 1.34 1.20 1.18 1.69 0.99 0.65 0.76
12-Dec-24 1.15 1.86 0.83 0.87 0.82 1.43 0.65 0.53 0.26
28-Nov-24 1.32 1.45 1.12 1.03 1.10 1.13 0.76 1.13 0.66
14-Nov-24 1.14 1.61 0.80 0.81 1.07 0.87 0.65 1.18 0.90
31-Oct-24 0.30 1.06 -0.03 0.59 0.60 0.82 0.11 0.81 0.09
17-Oct-24 -0.43 0.26 -0.44 0.04 0.24 0.67 -0.40 0.26 -0.28
03-Oct-2024 -1.14 -0.79 -1.26 -1.08 -0.59 -0.04 -1.18 -0.70 -1.45
19-September-2024 -0.67 -0.90 -1.12 -1.18 -0.66 0.33 -1.30 -1.10 -1.33
05-Sep-24 -0.85 -1.09 -1.26 -1.05 -0.77 0.21 -1.46 -1.00 -1.22
22-Aug-24 -0.62 -0.93 -1.08 -1.26 -0.70 0.21 -1.57 -1.03 -1.16
