Short bets on Asian currencies hit a three-month high amid hawkish Fed comments

After China's tepid growth target and the U.S. dollar's strength, investors turned more bearish on Asian currencies after the Federal Reserve chair warned of higher and faster interest rates.

Bearish bets on almost all Asian currencies have gone up since November with short bets on the Chinese yuan and the South Korean won reaching their highest since November, according to a fortnightly poll of 12 analysts.

About half of the poll responses were collected before Fed Chair Jerome Powell's hawkish comments earlier this week that had markets pricing in a 50 basis points bps rate hike at the central bank's meeting later this month.

This comes after weeks of consensus that 25 bps hikes would be the way forward.

The comments led to the dollar index, which measures the currency against six peers, hitting a three-month high.

According to Maybank, the risk sentiment in the market is skewed to the downside, as the dollar appeared to be supported by expectations of a hawkish Fed and weak China stimulus through the week.

For the second week in a row, short bets on the won were the highest among Asian currencies. The won is more susceptible to the dollar's moves than its Asian peers, underpinned by its tech exports-reliant economy.

China set its annual growth target at 5 per cent, which is below last year's 5.5 per cent, and below market expectations of about 6 per cent.

The Indian rupee, already the best performing currency in Asia this year, bucked the bearish trend as investors dialled back their short bets.

Michael Loh, an analyst at BNP Paribas, said that this could be due to positive seasonality for the country's trade balance and current account at the end of the fiscal year.

Malaysia's central bank is expected to maintain interest rates for its second consecutive meeting on Thursday. Short bets on the ringgit went up slightly.

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. The market is long U.S. dollars, according to a score of plus 3 or higher.

The findings are provided below positions in the U.S. dollar versus each currency.