By Archishma Iyer
(Reuters) - Bearish bets on the Chinese yuan and Malaysian ringgit strengthened sharply as a wobbly recovery in Asia's largest economy pressured fundamentals in other currencies, a fortnightly Reuters poll found on Thursday.
Short bets on the Chinese yuan firmed to their highest since October, according to a Reuters poll of 10 analysts, while bearish positions on the Malaysian ringgit climbed to their highest since November.
Optimism over Chinese recovery after nearly three years of strict COVID restrictions has waned, following a slew of bleak economic data this quarter.
Data released on Wednesday showed China's factory activity in May shrank more than expected on stuttering demand, making the country's path towards economic growth sloppier, even as the Caixin manufacturing PMI released early on Thursday bested estimates.
The yuan has lost nearly 3% so far this year making it one of the worst-performing Asian currencies.
"China's loss of economic momentum post-reopening has been surprising," Chang Wei Liang, an FX and Credit Strategist from DBS wrote in a research note.
"Given a corresponding decline in equity inflows, CNY softness could persist until there are signs of improvement in both investment and consumption."
The Malaysian ringgit has also borne the brunt of recent weakness in oil prices, with the currency emerging as the worst-performing unit of the region so far this year, falling more than 4.5%.
"So, the external environment has not been that favourable for Malaysia in particular," Christopher Wong, a currency strategist from OCBC said.
"It's largely driven by how the China reopening story has faded, as well as softer oil prices which have had an impact on the country."
The ringgit, which is also called a proxy to the yuan, has fallen in tandem with Brent crude prices, which have dropped nearly 15% on a year-to-date basis, Wong added.
Short positions were also confirmed on the Philippines peso, South Korean won and the Thailand baht.
Bearish bets on the Singapore dollar also rose to their highest since early March.
The Indonesian rupiah, which has significantly outperformed its regional peers this year with a near 4% appreciation, was the least shorted currency in the pack.
Separately, a divided U.S. House of Representatives passed a bill on Tuesday to suspend the country's $31.4 trillion debt, which if postponed, could have led to a damaging debt default, plunging the world's largest economy into recession and triggering a rout in riskier assets.
Most of the poll responses were received before the bill to suspend the U.S. debt ceiling was passed.
Investors will now focus on the key U.S. non-farm payrolls data for cues on the U.S. Federal Reserve's rate hike stance, even as market prices in a 36% chance of a 25-basis point increase this month, as compared to a steep 70% chance the previous week.
The Asian currency positioning poll is focused on what analysts and fund managers believe are the 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.
The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long U.S. dollars.
The figures include positions held through non-deliverable forwards (NDFs).
The survey findings are provided below (positions in U.S. dollar versus each currency):
DATE USD/CNY USD/KRW USD/SGD USD/IDR USD/TWD USD/INR USD/MYR USD/PHP USD/THB
01-Jun-23 1.88 0.68 0.73 0.23 0.70 0.48 1.77 1.08 0.45
18-May-23 1.27 0.88 0.19 -0.27 1.00 0.11 1.10 1.12 -0.50
04-May-23 0.56 1.01 -0.04 -1.05 0.65 -0.14 0.69 0.86 -0.43
20-Apr-23 -0.14 0.36 -0.13 -0.47 0.30 0.30 0.54 0.95 -0.12
06-Apr-23 0.04 0.56 -0.39 -0.26 -0.03 0.30 0.29 0.08 -0.06
23-Mar-23 0.17 0.87 0.16 0.74 0.63 0.58 0.74 0.36 0.37
9-Mar-23 0.68 1.30 0.65 0.56 0.78 0.28 0.78 0.42 0.30
23-Feb-23 0.36 0.77 0.21 0.12 0.30 0.80 0.49 0.33 0.37
9-Feb-23 -0.80 -0.63 -0.72 -0.53 -0.68 0.25 -0.64 -0.40 -1.00
26-Jan-23 -1.29 -1.14 -1.40 -1.15 -0.68 -0.47 -1.25 -0.78 -1.77
(This story has been refiled to fix syntax in paragraph 17)
(Reporting by Archishma Iyer in Bengaluru; editing by Eileen Soreng)
