Short bets on Thai baht fall sharply after Thai rate hike

Short bets on Thai baht fall sharply after Thai rate hike

After the first rate hike in the country in nearly four years, a bearish bet on emerging Asian currencies eased on hopes that the monetary tightening will cool red-hot inflation, with short bets on the Thai baht falling sharply after the first bet on the country in nearly four years, according to a Reuters poll.

According to the fortnightly poll of 12 analysts, the short positions on all emerging Asian currencies fell, with bets on China's yuan at their lowest since late-April.

Short bets on the Indonesian rupiah, the Singapore dollar and the Philippine peso fell to multi-month lows.

Short bets on the Thai baht slipped to their lowest since early June after the Bank of Thailand BoT raised its interest rate by 25 basis points, kick-starting its tightening cycle after lagging regional peers.

Thailand, which is heavily dependent on tourism, has begun to see signs of a gradual economic recovery as tourists return, allowing the BoT to manoeuvre its monetary policy.

The BoT is expected to maintain a gradual policy normalization throughout the rest of the year, according to analysts.

The baht, which is among the least shorted currency in the poll, looks set on a recovery path, having appreciated nearly 4 per cent since the start of this month. The currency fell by 10.2 per cent in the first seven months of the year.

Most of the poll responses came in after the Thai central bank announced the rate hike.

The Indonesian rupiah also featured among the least shorted currencies, as the country's economy remains on track for recovery but rising inflation and global recession risks have prompted calls for Bank Indonesia BI to hike interest rates.

Indonesia, Southeast Asia's largest economy, is one of the last countries in the region to maintain its monetary policy due to the Pandemic-era epidemic.

Analysts at Citi and OCBC are expecting BI to raise its benchmark seven-day reverse repurchase rate in a meeting later this month, with Citi seeing a 25 basis point hike. Maybank and ANZ don't believe that the central bank is moving towards tightening.

The South Korean won and the Taiwan dollar have been at their lowest level since April 21 despite short bets on the Indian rupee.

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 that the market is long on U.S. dollars.

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