Summary:
Analysts stayed bullish on Asian currencies, especially the Malaysian ringgit and Thai baht, as the US dollar weakened on dovish Fed expectations.
Analysts remained bullish on most Asian currencies despite marginally dialling back some bets, a Reuters poll showed last week, as a defensive US dollar driven by a dovish Fed.
Long bets were the highest on the Malaysian ringgit and the Thai baht, with those on the latter at their peak since January 2023, driven by strong growth fundamentals and stabilising politics.
"We do not rule out further bouts of USD weakness in the weeks ahead and expect overall downward pressure on USD/Asia FX to be sustained," analysts at Barclays said.
Ryota Abe, an economist at Sumitomo Mitsui Banking Corp, said the market view of Fed rate cuts by the year-end "looks excessive" which could lead to correction in Asian emerging market currencies.
Analysts were long on the Indonesian rupiah for the fourth consecutive iteration of the poll - the longest since May 2023 - underlining the appreciation stemming from growing inflows into emerging markets.
China's currency (Yuan) rose to its strongest level in nearly 16 months lately on bets that Beijing will unveil fresh economic stimulus, though gains were capped by dollar buying from Chinese state banks.
The Indian rupee continued to remain out of analysts' favour, although short positions were halved since early August as the currency staged a recovery following a sell-off driven by the unwinding of yen carry trades.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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