© Reuters. South Korean won, Chinese yuan and Japanese yen banknotes appear on US $ 100 banknotes in this image illustration taken in Seoul, South Korea, December 15, 2015. REUTERS / Kim Hong-Ji
By Harish Sridharan
(Reuters) – Bearish bets on Asian currencies reduced on signs that China’s economic pain could ease with COVID-19 restrictions easing, but analysts were still on alert for future lockdowns and the direction of US monetary policy, a Reuters showed measurement Thursday.
Short positions on South Korea’s won and the Taiwanese dollar were at their lowest since late February, while those on it fell to a six-week low, according to the two-week survey of 11 respondents.
Investor sentiment improved compared to fourteen days ago, when major Chinese cities, including Shanghai, rolled back the curbs after a two-month lockdown, and when the country unveiled new stimulus measures to strengthen its economy.
The yuan, whose depreciation had triggered a sell-off in other Asian currencies in mid-April, rose from a 20-month low it reached a few weeks ago.
However, analysts are still skeptical about China’s economic growth.
“I’m not sure the concerns about (growth) have subsided that much,” said Rob Carnell, research director and chief economist for Asia-Pacific at ING.
“There is a lot of doubt that this (relaxing curb in Shanghai) marks the end of China’s problems with COVID-19 and shutdowns.”
The mood in Asia was also helped by chilled expectations of aggressive US rate hikes, although concerns about inflation and a global recession have lingered under ambiguous signals from the Fed and its central bank governors.
Short positions on the Thai baht were at their lowest level since April ahead of a central bank meeting next week.
While easing COVID-19 restrictions helped the country’s economy show gradual improvement in May, its overall inflation has already exceeded the central bank’s target range.
“BOT has not yet signaled its intention to normalize policy, but we see an increasing risk of a hawkish shift,” economists at DBS wrote in a note, adding that the first increase could come in the fourth quarter of 2022.
Other Asian central banks have moved to tighten policy in recent months amid rising inflationary pressures, an economic recovery from the pandemic and a hawkish stance from the Fed.
Last week, South Korea’s central bank delivered its second straight rate hike, predicting further aggressive increases to bring consumer inflation down from 13-year highs.
Back-to-back increases from the Bank of Korea follow more than 100 cumulative basis points for austerity since August 2021 in one of the bank’s most powerful austerity campaigns ever.
The Asian currency positioning survey is focused 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 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 that the market is significantly far in US dollars.
The figures include positions held through non-deliverable forwards (NDFs).
Survey results are given below (positions in US dollars versus each currency):
DATE USD / C USD / USD / S USD / I USD / USD / USD / USD / USD / T
NY KRW GD DR {{2074 | TWD I PHP HB
02-Jun-22 1.22 0.56 0.38 0.90 0.73 1.18 1.06 0.59 0.54
19-May-22 1.90 1.55 1.07 1.19 1.63 1.35 1.53 1.15 1.56
05-May-22 1.75 1.50 0.73 0.56 1.49 1.04 1.47 1.09 1.33
21-Apr-22 0.10 1.07 -0.17 -0.03 0.94 0.75 0.89 1.00 0.71
07-Apr-22 -0.41 0.99 -0.46 -0.05 0.81 0.63 0.32 0.53 0.31
24-Mar-22 -0.16 0.98 0.19 0.04 1.16 0.99 0.12 1.40 0.46
09-Mar-22 -0.85 1.22 0.8 0.49 0.97 1.1 0.05 0.89 -0.08
24-22-Feb -0.99 0.39 -0.77 -0.01 0.33 0.07 0.2 0.19 -1.07
