Asian currencies to mostly rise, bullish bets double on South Korean won

Investors remain bullish on most Asian currencies with bets on the South Korean won doubling over the past two weeks, a Reuters poll showed, driven by expectations the dollar would weaken further amid mounting fears of a global trade war. The greenback, which slumped 10 percent last year in its steepest drop since 2003, has come under more pressure recently from US President Donald Trump's planned tariffs on steel and aluminium - a move that risks retaliatory measures against US exports from other economies.
On Thursday, the dollar drew some relief from indications the tariffs could include carve-outs for key partners, and steadied above a two-week trough against a basket of six major currencies, while markets waited for the signing of a presidential proclamation for further trading cues. Given this backdrop, investors have hiked their bullish bets on the South Korean won and the Malaysian ringgit, while staying bullish on several others such as the Singapore dollar, the Chinese yuan and the Thailand baht, a Reuters poll of 12 analysts showed.
The won hit a more than 1-month high this week, capitalizing on the recent dollar weakness. Annual inflation in the country rose in February, but held below a 2 percent target, making it a hurdle to any policy tightening this year. The outlook for the ringgit was underpinned by a better-than-expected jump in Malaysia's January exports. The country's central bank maintained its key interest rate on Wednesday as easing inflationary pressures and solid growth implied a healthy economy.
The poll participants also trimmed their bearish bets on the Philippine peso. However, bullish positions on some Asian currencies were trimmed amid views the US central bank could raise interest rates at a faster pace this year, underpinning the greenback. Bullish bets on the Taiwan dollar plunged about 38 points to their lowest since January, the biggest drop amongst its peers, hurt also by a surprise decline in exports in February and a more-than-expected rise in inflation.
Bearish positions on the Indian rupee rose to their highest since October, as investors took cues from a contraction in the country's service sector in February. Bearish bets on the Indonesian rupiah rose six-fold to their highest since December 2016. The currency, which has lost more than 1 percent this year, hit a 2-year low this month. Dollar demand from Indonesian companies for debt repayment has added to the pressure on the rupiah, a senior official in the central bank recently said.
Bullish bets on the Chinese yuan were largely flat, according to the poll. The currency had a strong run in 2017, which it extended into 2018, but a slowdown in factory activity has raised doubts about the sustainability of China's economic growth. The 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.