Bullish bets on Asian FX trimmed as traders eye excessive U.S. yields: Reuters ballot By Reuters
© Reuters. FILE PHOTO: South Korean won, Chinese yuan, and Japanese yen notes appear on US $ 100 notes in this image illustration taken in Seoul
From Anushka Trivedi
(Reuters) – Investors reduced long positions in Asian currencies as the outlook for emerging market bonds deteriorated after US yields rose. According to a Reuters poll, bets on the South Korean won and Taiwan’s dollar almost halved.
The greenback has made up for some losses since benchmark government bond yields rose to more than 1% after the Democrats captured the U.S. Senate last week, easing the possible passage of a major fiscal stimulus through debt issuance.
As a result, bullish bets on the Singapore dollar, the Malaysian ringgit and the Thai baht were cut for the first time since the COVID-19 vaccine announcement in early November, the poll of 15 respondents found.
“The bond market is cautious about an increase in supply and a possible increase in fiscal incentives by the new US President Joe Biden, resulting in higher returns,” said Mitul Kotecha, a senior EM strategist at TD Securities.
“Therefore, the yield differential on some Asian currencies seems less attractive.”
Market participants are also concerned about the resistance of Asian central banks to currency gains, he added, noting that the People’s Bank of China is concerned about the yuan’s rapid rise.
However, several analysts agreed that this dip in sentiment would be short-term as they would bet on vaccine rollouts and a rebound in exports to fuel the recovery of trade-dependent Asian economies in 2021.
On the poorly performing South Korean won, bullish views have been dragged to their lowest level in three months. Investors were concerned about the worsening COVID-19 situation in the country after the third wave of infections last month nearly destroyed the health system.
The won has since lagged its peers, while stocks and bonds were sold heavily by overseas investors in December.
Bullish bets on the Taiwanese dollar, Asia’s best-performing currency in 2020, and the yuan were easily settled after local central banks took steps to contain their soaring local currencies.
Sources told Reuters that Taiwan’s central bank urged banks trading forex transactions to exercise restraint a week after their intervention in order to keep the local currency in check.
Meanwhile, the People’s Bank of China has taken steps to curb capital inflows and keep the yuan from moving too fast after breaking the all-important $ 6.50 per dollar mark earlier this year.
The Reuters survey focuses on the current market positions of analysts in nine Asian emerging market currencies: the Chinese yuan, the South Korean won, the Singapore dollar, the Indonesian rupiah, the Taiwan dollar, the Indian rupee, the Philippine peso, the Malaysian ringgit and the Thai baht.
The survey uses estimates of net long or short positions on a scale from minus 3 to plus 3.
A value of plus 3 indicates that the market in US dollars is very long. The figures included positions held through non-deliverable futures contracts (NDFs).
ASIAPOSN’s survey results are shown below (positions in US dollars versus each currency):
Date USD / C USD / K USD / S USD / I USD / T USD / I USD / M USD / P USD / TH
NY RW GD DR WD NR YR HP (NYSE 🙂 B.
14-Jan -1.21 -0.87 -0.83 -0.57 -0.89 -0.22 -0.30 -0.80 -0.50
10-Dec -1.53 -1.68 -1.11 -0.61 -1.6 -0.2 -0.53 -0.97 -0.87
26-Nov -1.43 -1.29 -1.01 -0.92 -1.08 -0.3 -0.75 -0.8 -0.66
Nov 12 -1.28 -1.52 -0.99 -1.01 -1.08 -0.26 -0.44 -0.67 -0.8
Oct 29 -0.86 -1.14 -0.49 0.09 -1.23 -0.07 -0.03 -0.09 -0.02
15-Oct -1.07 -0.94 -0.72 0.35 -1.12 -0.44 -0.33 -0.15 0.1
01-Oct -0.47 -0.53 -0.25 0.61 -0.68 -0.31 -0.31 -0.68 0.38
17-Sep -1.25 -0.6 -0.61 0.39 -0.51 -0.54 -0.89 -1.07 -0.17
03-Sep -1.41 -0.71 -0.99 -0.19 -0.4 -0.91 -0.96 -1.34 -0.15
20-Aug -1.02 -0.71 -0.69 0.43 -0.31 -0.35 -0.62 -1.12 -0.21
06-Aug -0.81 -0.44 -0.57 0.45 -0.54 -0.31 -0.29 -0.76 -0.2