Thu Sep 19 08:01:11 UTC 2024: ## Asian Currencies Buoyed by Dovish Fed, Despite Slight Dip in Bets
**SINGAPORE (Reuters)** – Analysts remain optimistic about the outlook for most Asian currencies, even with a minor decrease in bullish bets, according to a Reuters poll published on Thursday. This positive sentiment is fueled by a weakening U.S. dollar, driven by the Federal Reserve’s dovish stance on interest rates, making risk-sensitive assets more appealing.
The Malaysian ringgit and Thai baht saw the strongest bullish bets, with the latter reaching its highest level since January 2023. These currencies are benefiting from robust economic fundamentals and stabilizing political landscapes.
The survey, conducted before the Fed’s half-point rate cut and Bank Indonesia’s surprise quarter-point cut on Wednesday, suggests that the anticipation of further Fed rate cuts has put downward pressure on the dollar, providing a much-needed respite for emerging markets.
“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 stated. The dollar index, which tracks the dollar against a basket of major currencies, is currently trading near 100, down from 104 at the end of July.
While analysts anticipate continued appreciation of Asian currencies in the fourth quarter, they foresee a potential reversal in the first half of 2025. Ryota Abe, an economist at Sumitomo Mitsui Banking Corp, cautioned that the market’s expectation of Fed rate cuts by year-end could be excessive, potentially leading to a correction in Asian emerging market currencies.
The survey also revealed a dip in bullish bets on the Chinese yuan and Singapore dollar, returning to levels seen four weeks ago. Meanwhile, bets on the Philippine peso hit a four-year high.
The Indonesian rupiah, which has appreciated by more than 6% since July, continues to garner bullish bets for the fourth consecutive poll, the longest streak since May 2023. This trend is attributed to strong economic fundamentals and growing inflows into emerging markets. The recent surprise rate cut by Bank Indonesia, aimed at boosting growth, is expected to further support the rupiah’s gains.
The Indian rupee, however, remains out of favor among analysts, though short positions have been halved since early August following a recovery from a sell-off triggered by the unwinding of yen carry trades.
The poll surveyed 10 economists and analysts on their 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.
First Piper 