Anushka Trivedi

(Reuters) – Short bets were placed on emerging Asian currencies by investors, a Reuters poll revealed. This was due to a variety of factors, including rising inflation, U.S. rates-hike expectations and signs that global economic growth is slowing down.

The poll showed that long positions in the Singapore dollar, Taiwanese dollar, and Indian rupee have been reversed while bearish sentiments about South Korea reached a two year high.

However, the Indonesian Rupiah was not the only currency that had a bullish tendency. Long bets nearly halved.

Since the Federal Reserve’s two-week-old hawkish bias led markets to expect a rate rise sometime between 2022 and 2022. Sharp gains in benchmark Treasury yields have added to their appeal.

As inflation worries rise and rising energy prices threaten global economic growth, the dollar will continue to be the dominant currency market for at least another year.

Asia’s economic prospects are already marred by China’s slowdown, supply-chain bottlenecks and the long-lasting effects of COVID-19 inflicted on trade-reliant nations like Singapore, Thailand, Philippines.

However, yuan bets remained stable despite a crisis at China Evergrande’s property company. HSBC partially attributed this to the hopes of an onshore market for a Chinese central bank policy tweak.

As India is the third largest oil consumer in the world, investors turned bearish after rupee prices reached $80 per barrel. Since the Fed meeting in August, the rupee has been Asia’s most popular currency.

Graphic: Asia EM FX since Fed – https://fingfx.thomsonreuters.com/gfx/mkt/byprjlznjpe/EM%20asia%20with%20oil.PNG

Analysts Barclays LON: A recent dip in foreign funds flows to Indian equity seemed to have been compensated for by a rise in bonds. The economy’s growth trajectory was still intact, and the rupee would not breach the 75.0 mark.

The currencies of South Korea and Taiwan have declined in tandem with the sell-offs in tech stocks-dominated local bourses, which are highly sensitive to inflation. These currencies have seen outflows of $762 million and $2.13 billion, respectively, this month.

Barclays analysts reported that while investors preferred the rupeh over other Asian currencies, higher commodity prices, and large trade surpluses were seen as putting a floor beneath the currency.

The Asian currency position poll examines what fund managers and analysts believe to be the current market positions of nine emerging Asian currencies.

This poll measures net long and short positions using a scale of 3-3 to 3. Plus 3 is a sign that the market has significant length in U.S. dollar.

Figures include forward positions not delivered (NDFs).