Yuan sentiment turns bearish, weakest since mid-2012: Reuters poll

SINGAPORE Fri Mar 14, 2014 1:03am GMT

Chinese banknotes are seen at a vendor's cash box at a market in Beijing February 14, 2014. REUTERS/Kim Kyung-Hoon

Chinese banknotes are seen at a vendor's cash box at a market in Beijing February 14, 2014.

Credit: Reuters/Kim Kyung-Hoon

SINGAPORE (Reuters) - Sentiment on the Chinese yuan turned bearish for the first time since mid-2012 in recent weeks as the country's central bank weakened the currency to punish speculators, a Reuters poll showed.

The poll also showed long positions in the Indonesian rupiah rose to their highest level in nearly three years, while views on the Philippine peso turned bullish for the first time since November, 2013.

Bearish bets were placed against the yuan for the first time since August 2012, and were at the highest level since June 2012, the survey of 13 currency analysts showed.

The results suggested that market participants had built up short positions in the yuan in the two weeks since the previous survey in late February, when sentiment toward the yuan turned neutral, ending a streak of long yuan positions that had started in a September 2012 poll.

The market had long been bullish on the yuan due to China's large current account surplus, foreign exchange reserves and fund inflows.

Sentiment worsened recently, however, after the People's Bank of China surprised global markets in February and early March by engineering a sharp decline in the yuan, a move traders have said was aimed at deterring speculators betting on non-stop yuan appreciation.

Still, the survey showed that market sentiment toward emerging Asian currencies was improving overall, with bullish bets on the Indonesian rupiah, the best performing emerging Asian currency so far this year, rising to their largest levels since May 2011.

The rupiah has been boosted this year by an improvement in the country's current account, and as yield-seeking foreign money flocked back to Indonesian equities and bonds.

Long positions in the Indian rupee tripled compared to two weeks ago and rose to their highest level in two years.

The rupee rallied to a seven-month high against the dollar earlier this week as foreign investors continued to buy into both local equities and debt.

Underscoring the general improvement in sentiment toward emerging Asian currencies, bets on the Philippine peso turned bullish for the first time since last November.

Market participants cut back on their bearish bets against the Thai baht, which has been pressured by prolonged and at times violent political tension.

While the positions were still slightly bearish, sentiment improved to the best level since last October, when market sentiment toward the baht had been slightly bullish.

Long positions in the Malaysian ringgit just barely exceeded a peak hit last October and reached their highest level since May 2013.

Sentiment toward the Singapore dollar paled in comparison, turning bearish for the first time since late January.

The Reuters survey is focused on what analysts 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 included positions held through non-deliverable forwards (NDFs).

(Reporting by Masayuki Kitano and Shaloo Shrivastava in BANGALORE; Editing by Kim Coghill)