Asian currency bears retreat as the outlook for inflation improves.

 

According to a fortnightly poll of 12 analysts, short positions on all emerging Asian currencies fell, with bets on China's yuan at their lowest since late April.

Short positions in the Philippine peso, Singapore dollar, and Indonesian rupiah all hit multi-month lows.

An unchanged July inflation print in the United States, the first notable sign of relief after years of rising prices, also helped boost sentiment in the region.

Short bets on the Thai baht fell to their lowest level since early June after the Bank of Thailand (BoT) raised its interest rate by 25 basis points on Wednesday, resuming its tightening cycle after trailing regional peers.

Thailand, whose economy is heavily reliant on tourism, has begun to show signs of a gradual economic recovery as tourists return, allowing the BoT to adjust its monetary policy.

Analysts widely anticipate that the BoT will maintain gradual policy normalisation throughout the rest of the year.

The baht, one of the least shorted currencies in the poll, appears to be on the mend, having gained nearly 4% since the beginning of the month.

In the first seven months of the year, the currency fell by 10.2%.

The majority of poll responses came in after the Thai central bank announced the rate increase.

The Indonesian rupiah was also among the least shorted currencies, despite the fact that the country's economy is on track for recovery, but rising inflation and global recession risks have prompted calls for Bank Indonesia (BI) to raise interest rates.

Indonesia, the largest economy in Southeast Asia, is one of the region's last to maintain its pandemic-era loose monetary policy.

Citi and OCBC analysts predict that BI will raise its benchmark seven-day reverse repurchase rate in a meeting later this month, with Citi expecting a 25 basis point increase.

Maybank and ANZ, on the other hand, do not see the central bank rushing to tighten.

Short bets on the Indian rupee, South Korean won, and Taiwan dollar fell to their lowest levels since April 21.

The Asian currency positioning poll examines analysts' and fund managers' perceptions of the current market positions of nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit, and Thai baht.

On a scale of -3 to +3, the poll uses estimates of net long or short positions. A plus 3 score indicates that the market is significantly long on US dollars.

Positions held through non-deliverable forwards are included in the figures (NDFs)