Author: Sameer Manekar
(Reuters) – Analysts strengthened their bearish stance on most Asian currencies as higher-than-long-term U.S. interest rates and a resilient dollar are likely to continue to hurt local units, a Reuters survey showed on Thursday.
The Indonesian rupiah and Philippine peso were the lowest-performing currencies in the region, with rates for both currencies hitting multi-week highs, a biweekly survey of 10 analysts showed.
The responses were received ahead of the May US inflation report, which showed prices remaining unchanged, and ahead of the Federal Reserve’s monetary policy meeting, at which the central bank postponed the start of interest rate cuts until December. However, investors in contracts tied to the Fed’s benchmark rate kept their bets unchanged on quarter-point cuts in September and December.
“We continue to see upside risks to DXY (), given that we are in an uncertain inflation transition period (in the U.S.) and markets may continue to remain cautious,” Maybank analysts said in a note on Thursday.
“The Fed staying at high levels for an extended period of time won’t do Asian currencies any favors either, with the scatter charts currently showing only one cut this year.”
The Indonesian rupiah, one of the worst-performing currencies in the region this year, has seen analysts enhance their low positions throughout the year as external factors and corporate dividend outflows put pressure on the currency.
“We are more skeptical of THB (baht) and IDR (rupee) in the near term due to continued dividend outflows,” HSBC analysts said.
“As long as the IDR remains under pressure – which is quite likely in the near term given the outflow of dividends by the end of July, the declining trade surplus and the lack of portfolio inflows – we cannot rule out further rate increases by BI (Bank Indonesia).”
Short rates on the Philippine peso have risen as the local central bank maintains its view that interest rates could be cut as early as August despite rising inflation.
“The Fed’s signal of an interest rate cut is likely to result in increased depreciation pressure on PHP,” HSBC analysts said.
Meanwhile, analysts have been negative on the Indian rupee, one of the best-performing currencies in the region this year, as external factors such as high interest rates and geopolitical tensions in the Middle East put pressure on the currency.
Bearish sentiment also increased for the South Korean won, Taiwan dollar and Singapore dollar, while it declined slightly for the Chinese yuan and Thai baht.
The Asian Currency Positioning Study focuses on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: Chinese Yuan, South Korean Won, Singapore Dollar, Indonesian Rupiah, Taiwan Dollar, Indian Rupee, Philippine Peso, Malaysian Ringgit and Thai baht.
The survey uses estimates of net long or low positions on a scale of minus 3 to plus 3. A result of plus 3 means that the market is significantly long in US dollars.
The data includes positions held under delivery forward contracts (NDF).
The survey results are presented below (items in US dollars compared to individual currencies):
DATE
13-June-24 0.95 0.87 0.62 1.22 0.64 0.37 1.00 1.23 0.92
30-May-24 1.05 0.72 0.33 0.94 0.53 0.00 0.81 1.19 1.00
16-May-24 1.05 0.96 0.35 0.96 1.02 0.39 1.23 1.29 1.00
2-May-24 1.25 1.61 0.89 1.39 1.40 0.49 1.46 1.44 1.39
18-April-24 1.25 1.59 0.80 1.32 1.24 0.43 1.42 1.19 1.28
4-April-24 1.18 1.09 0.42 1.13 1.17 0.00 1.15 0.62 1.35
21-Mar-24 0.92 0.82 0.33 0.60 0.92 -0.54 1.12 0.47 1.13
7-Mar-24 0.84 0.54 0.25 0.53 0.64 -0.59 1.14 0.52 1.05
22-Feb-24 0.70 0.40 0.20 0.20 0.70 -0.40 1.30 0.30 1.10
8-Feb-24 0.40 0.39 0.41 0.40 0.32 -0.17 1.07 0.28 0.72
