Asian forex bears climb multi-year highs as short bets on Thai baht rise most

Bearish bets on nearly all Asian currencies firmed to new multi-year highs

As fears of an impending recession from rapidly rising interest rates to rein in sky-high inflation dampened sentiment, a Reuters poll has showed.

Short positions on the Thai baht, the Philippine peso and the Singapore dollar were at their highest since 2018, when data was first available, according to a fortnightly poll of 13 respondents.

Analysts on average have not held net long positions on any Asian currency since late April.

Bearish bets on the baht firmed the most, with a worsening Covid-19 situation in China

which pursues a ‘zero-COVID’ strategy, stoking fears of a delay in return of Chinese tourists to Thailand. Pessimism levels on the Chinese yuan, seen as a safer bet among Asia currencies, remained largely unchanged.

The Philippine peso was the most shorted Asian currency after it hit a 17-year low earlier this week, as investors feared the Bangko Sentral ng Pilipinas’ (BSP) rate hikes would still leave it behind the curve in fighting inflation.

“What makes PHP stand out here is that the Philippines is a net food importer, which also has a high food trade deficit. That is leaving the country quite vulnerable to rising food costs in the aftermath of the pandemic,” said Daniel Dubrovsky, analyst at IG.

“At the end of the day, despite recent improvement in hawkish BSP expectations, the Federal Reserve remains far more aggressive.”

The poll responses were collated before the BSP surprised markets on Thursday with an off-cycle 75-basis points hike to its benchmark interest rate.

Worries that central banks, including the Philippines and Thailand, may fall well behind the Fed in tightening policy have ebbed away confidence in these countries’ currencies in recent months.

Thailand has so far left its key rate at a record low, but economists have forecast the Bank of Thailand to raise it at its next meeting on Aug. 10. In another off-cycle move,

Singapore’s central bank also re-centred the midpoint of the currency’s exchange rate policy band earlier in the day.

Analysts raised their short positions on the Indian rupee, which has hit record lows every day so far this week despite efforts from the central bank to boost foreign exchange inflows.

India, like many other economies, is battling soaring inflation in spite of policy tightening and wheat export curbs.

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). – Reuters