Bearish bets on Asian currencies reduced on signs that China’s economic pain may abate with easing of COVID-19 curbs, but analysts were still wary of future lockdowns and the direction of US monetary policy, a Reuters poll showed on Thursday.
Short positions on South Korea’s won and the Taiwanese dollar were at their lowest since late-February, while those on the Chinese yuan slipped to a six-week low, according to the fortnightly survey of 11 respondents.
Investor sentiment improved, compared with a fortnight ago, as major Chinese cities including Shanghai rolled back curbs after a two-month lockdown, and as the country unveiled new stimulus measures to bolster its economy.
The yuan, whose depreciation had triggered a sell-off in other Asian currencies in mid-April, recovered from a 20-month low it touched a couple of weeks ago.
However, analysts are still sceptic about China’s economic growth.
“I’m not sure (growth) concerns have waned all that much,” said Rob Carnell, head of research and chief economist for Asia-Pacific at ING.
“There is a lot of doubt that this (relaxing curbs in Shanghai) marks the end of China’s problems with COVID-19 and lockdowns.”
Sentiment in Asia was also aided by cooling expectations of aggressive US interest-rate hikes, although worries over inflation and a global recession have festered amid ambiguous signaling from the Fed and its governors.
Short positions on the Thai baht were at their lowest since April, ahead of a key central bank meeting next week.
While a relaxation of COVID-19 curbs helped the country’s economy show gradual improvement in May, its headline inflation has already breached the central bank’s target range.
“BOT is yet to signal its intent to normalize policy, but we see a rising risk for a hawkish shift,” economists at DBS wrote in a note, adding that the first hike could come in the fourth quarter of 2022. – Reuters
