Pessimism on yuan spreads through Asia

SINGAPORE: Pessimism about the Chinese yuan is at a five-year high as the world’s second-largest economy loses steam, and the outlook for most emerging Asian currencies has also deteriorated on expectations of a US rate increase this week, a Reuters poll shows.

Bearish bets on the yuan have hit the highest level since April 2010, according to the survey of 18 fund managers, currency traders and analysts conducted from Dec 8-10. In April 2010, Reuters started including the Chinese currency in a survey of market positioning in emerging Asian currencies.

The renminbi has fallen to levels seen right after China on Aug 11 surprised global investors by devaluing the currency. The People’s Bank of China last Thursday set its daily guidance rate at its weakest level in more than four years.

That came as economic data suggested China’s economy needs more stimulus to regain footing. China’s factories were plagued by persistent producer price deflation in November, while exports last month fell more than expected.

Bearish views on most other emerging Asian currencies have grown now that the US Federal Reserve is widely expected to raise interest rates on Wednesday for the first time in nine years. November US job creation topped expectations, while September and October figures were revised up.

Short positions on the South Korean won rose to their highest since early October as foreign investors have continued to dump Korean stocks. Bearish bets on the Indonesian rupiah also touched the highest level since early October.

The rupiah last Thursday hit a two-month low on growing corporate dollar demand for year-end payments and repatriations.

Taiwan’s dollar posted the most bearish bets in more than two months as the sluggish Chinese economy kept hurting the island’s exports. Overseas shipments in November slumped far more than expected, denting hopes for a turnaround in the economy in the fourth quarter after a contraction in July-September.

Pessimistic bets on the Indian rupee, the Singapore dollar, the Malaysian ringgit and the Thai baht also increased to one-month highs. The rupee on Dec 4 fell to its weakest since September 2013. Foreign investors sold a net $1.7 billion in Indian shares and debt in November, the highest sales since August.

In Singapore, economists have revised their 2015 and 2016 growth forecasts down from three months ago, a central bank survey showed last week.

The ringgit is also under pressure as global crude prices test sevenyear lows, underscoring concerns over Malaysia’s falling oil and gas revenue.