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Bullish Bets Set on Asian Currencies
A recent poll by Reuters showed a strengthening of bullish bets on the majority of emerging Asian currencies. This shift was propelled by the anticipation of a halt in U.S. interest rate hikes, which has subsequently softened the greenback and increased investors' appetite for riskier assets.
Strengthened Positions on Taiwanese Dollar, Singapore Dollar, and South Korean Won
Analyzed views of 10 analysts in a biweekly survey revealed strengthened long positions on the Taiwanese dollar, the South Korean won, and the Singapore dollar. Sentiment towards these riskier Asian currencies has seen a positivity spike as market participants wager on a weak U.S. dollar. This follows the release of the U.S. Federal Reserve's latest economic predictions which signaled a likely stop to the interest rate hike series.
Federal Reserve Signals End of Rate Hikes
The dollar dropped to a new low of four months after the Fed's unchanged interest rates announcement on Wednesday. The announcement suggested a potential end to the historical tightening of monetary policy with early indicators revealing quicker-than-anticipated deflation rates and future conversations around cost-cut reductions "coming into view."
HSBC Analysts Predict Positive Outlook for Asian Currencies
HSBC analysts have observed this transition of discussion around rate increments to cuts at the Federal Reserve's last meeting for 2023. As a result, they predict a significant decrease in USD-Asia and forecast Asian currencies finishing on an optimistic note similar to 2022.
Other Currencies Also Strengthen
Foreign exchange analysts also noticed a unique strength in bullish bets on the Philippine peso. This trend came about before the announcement from Bangko Sentral ng Pilipinas that its benchmark interest rate would remain at 6.50% for a second meeting running. They also suggested a long-lasting tight policy to steer inflation back on course.
Indian Rupee Remains Steady Amid Rising Retail Inflation
In contrast, India's rising retail inflation has witnessed a more cautious approach with the Reserve Bank of India unlikely to ease interest rates in the near future. Despite this, short positions on the Indian rupee were at their lowest since the end of July.
Bearish Bets on Chinese Yuan and Malaysian Ringgit Eases
There were less bearish bets on the Chinese yuan and the Malaysian ringgit. However, the Chinese economy's slow post-pandemic recovery amid a deepening housing crisis, growing local government debt, slowing global growth and geopolitical stresses continues to impede economic momentum in the country.
The Asian currency positioning poll focuses on the current market positions of nine emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwanese dollar, Indian rupee, Philippine peso, Malaysian ringgit, and the Thai baht.
