4 days ago
Oil Surge and Dollar Strength Deepen Bearish Asian Currency Bets
Investors are betting that several Asian currencies may lose value.
This is happening because oil became more expensive and U.S. interest rates and Treasury yields rose.
Countries that import a lot of oil must pay more for energy, which can hurt their trade balances.
A stronger dollar can also make local currencies look weaker.
The Philippine peso faced the most negative bets in the survey.
The Thai baht, Indian rupee and Malaysian ringgit also came under pressure.
Malaysia’s electronics exports may help balance its higher energy costs.
Investors became less negative about Indonesia’s rupiah after a change in finance ministry leadership.
A Reuters poll found stronger bearish bets against several emerging Asian currencies as oil prices and U.S. Treasury yields rose.
The Philippine peso remained the most heavily shorted currency, despite analysts saying its undervaluation and domestic fundamentals could support it.
Bearish positions against the Thai baht, Indian rupee and Malaysian ringgit also increased.
Malaysia’s electronics trade surplus may offset higher energy costs, while Indonesian rupiah short positions fell after a finance ministry leadership change.
Investors reduced bullish positions on the Taiwan dollar, Singapore dollar and South Korean won.
- Who
- Investors, analysts and fund managers surveyed by Reuters, with comments from MUFG analysts.
- What
- Bearish bets increased against several emerging Asian currencies as oil prices and U.S. Treasury yields strengthened the dollar.
- Where
- Across nine emerging Asian currency markets, including the Philippines, Thailand, India, Malaysia and Indonesia.
- When
- The poll was conducted this week before the Federal Reserve raised interest rates on Wednesday; oil rose after pipeline attacks the previous week.
- Why
- Higher oil prices are increasing energy import costs, while higher U.S. yields are making the dollar more attractive and tightening global financial conditions.
Bearish pressures
Potential offsets
Impact of higher oil prices
Bearish pressures
Energy-importing economies face larger import bills, weaker trade balances and pressure on their currencies.
Potential offsets
Malaysia’s electronics trade surplus may be sufficient to offset its higher energy import bill.
Outlook for the Philippine peso
Bearish pressures
The peso remained the most heavily shorted currency, with bearish positions reaching their highest level in more than four months after record lows in September.
Potential offsets
MUFG analysts said the risk-reward balance for long-dollar positions against the peso had become less attractive because the currency was undervalued and domestic fundamentals were improving.
Indonesian rupiah sentiment
Bearish pressures
The rupiah had fallen 6% during the year, reflecting ongoing currency pressure.
Potential offsets
Investors reduced short positions after President Prabowo Subianto replaced the finance minister with the deputy finance minister.
Key facts
- Most shorted currency
- The Philippine peso remained the most heavily shorted currency in the poll.
- Oil price
- Oil prices rose above $100 a barrel.
- Currencies with increased short positions
- The Thai baht, Indian rupee and Malaysian ringgit saw short positions rise to their highest levels since July or near-term comparison periods stated in the poll.
- Malaysian cushion
- MUFG analysts said Malaysia’s electronics trade surplus could offset the effect of a higher energy import bill.
- Indonesian rupiah
- Investors trimmed short positions even though the rupiah had fallen 6% this year.
- Currencies covered
- The poll tracks the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and Thai baht.
- Position scale
- Positions are measured from minus 3 to plus 3 and include positions held through non-deliverable forwards.
Sources
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