Sept 19 (Askume) – Analysts remain optimistic about most Asian currencies, a Askume survey found on Thursday, although the appeal of sensitive assets has waned as the U.S. Federal Reserve’s easing policy has pushed the U.S. dollar into defensive mode, a Askume survey found on Thursday. Some have reduced bets slightly.
Bulls are betting on the Malaysian ringgit and Thai baht, which have risen to their highest levels since January 2023, driven by strong growth fundamentals and stable politics.
We received responses to our biweekly survey of 10 economists and analysts ahead of the Federal Reserve’s half-basis point rate cut on Wednesday and a surprise quarter-point rate cut by Bank Indonesia.
Concerns about a rate cut by the Federal Reserve have put the dollar on the defensive, providing relief to emerging markets and adding to their appeal. Most Asian currencies rallied strongly against the US dollar in August.
“We do not rule out the possibility of weakness in the USD in the coming weeks and expect overall downward pressure on USD/Asia FX to persist,” Barclays analysts said.
The US dollar index against major currencies is currently close to 100, up from 104 at the end of July.
Analysts said they expect Asian currencies to continue to rise in the fourth quarter but could see a recovery in the first half of 2025.
Ryota Abe, an economist at Sumitomo Mitsui Banking Corporation, said the market’s outlook for the Federal Reserve to cut interest rates before the end of the year seems “exaggerated,” which could lead to a recovery in Asian emerging market currencies.
Bullish bets on the yuan and Singapore dollar are at levels last seen four weeks ago, while bets on the Philippine peso are at their highest in four years.
In the survey, analysts were bullish on the Indonesian rupiah for the fourth consecutive time, the longest period since May 2023, highlighting strong economic fundamentals and recent appreciation from emerging market capital inflows.
The rupiah has gained more than 6% since July and is expected to rally further following Bank Indonesia’s (BI) decision to abruptly cut interest rates ahead of the Federal Reserve to support economic growth.
Barclays analysts said Bank Indonesia “may match or slightly underperform the Fed in terms of the total amount of rate cuts” so “the IDR will not necessarily be liked by the market from a rate differential perspective”.
The Indian rupee remains out of favor with analysts, although short bets on the currency have halved since the beginning of August as the currency recovered from a sell-off caused by the end of the yen carry trade .
The Asia Currency Situation Survey focuses on what analysts and fund managers believe are current market conditions for nine of Asia’s emerging currencies: the Chinese yuan, Korean won, Singapore dollar, Indonesian rupee, New Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit.
The survey uses a scale of net long or short positions ranging from minus 3 to plus 3. A score of +3 indicates a market with large long USD positions.
These figures include positions received through non-deliverable forwards (NDF).
Here are the findings (in US dollars against each currency):
