Bullish bets on Asia FX rise; won long positions near 3-1/2-year high

Investors added to their bullish bets on most Asian currencies in the last two weeks, with long positions on the won at the highest since mid-2014 on expectations that South Korea's central bank would raise rates for the first time in years, a Reuters poll showed. The poll of 12 analysts, traders and fund managers was conducted on Wednesday, a day before the Bank of Korea tightened policy for the first time in more than six years as a sustained export boom lifts economic growth.
The won slid 1 percent against the dollar, however, after BOK Governor Lee Ju-yeol tempered market expectations for more tightening by raising concerns about the job market and other uncertainties. "I think the USD-KRW pair would recoup part of its recent losses on the very dovish BOK rhetoric," said Andy Ji, Asia currency strategist at Commonwealth Bank of Australia. Still, the won remains on track for a gain of 3 percent so far this month and about 11 percent this year, making it the best performer in the region.
Investors also raised their bullish bets on the Malaysian ringgit, the Thai baht and the Singapore dollar, the poll showed. The outlook for the Malaysian ringgit brightened, with bullish bets at their strongest since March 2012, after data earlier this month showed the economy expanded at its fastest pace in over three years in the third quarter, raising hopes of policy tightening at the central bank's policy meeting in January.
Similarly in Singapore, brisk economic growth in the third quarter has pushed up expectations for tighter policy, with investors raising bullish bets on the Singapore dollar to the highest level since early August. Investors also trimmed bearish bets on the Philippine peso as the government inches closer to passing a tax reform plan, which has been a hurdle for President Rodrigo Duterte's administration since it came to power last year. The Senate on Tuesday passed the first of five tax reform packages Duterte is pushing.
The peso is the worst performer in the region so far this year. It has been hurt by a widening trade deficit and concerns that the economy risks overheating due to a double-digit rise in credit growth and strong GDP growth. The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the 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 the market is significantly long US dollars.