Emerging Market Currencies Outlook Negative, RMB Favored

Reuters: Reuters poll - Asia FX sentiment turns down

Foreign investors continued to sell Thai bonds as top policy makers expressed a preference for a weaker baht as exports sagged and the economy struggled for momentum.

India's rupee experienced its largest short positions since mid-August. Sentiment on the rupee had been bullish since early October last year before souring in recent weeks.

...In the previous poll published on April 30, views on most emerging Asian currencies turned bullish for the first time in six months amid views that the U.S. Federal Reserve may wait longer before starting to raise interest rates.

The latest survey showed long positions in the Chinese yuan fell only slightly even as the economy continued to lose steam in April despite a series of policy easings, including an interest rate cut on Sunday.

Overall optimism on the renminbi held firm as China's top officials including Premier Li Keqiang and PBOC Governor Zhou Xiaochuan have pledged to keep the yuan stable despite downward pressure exerted on the currency from the slowing economy.

Other emerging Asian currencies weren't so lucky, with sentiment turning negative on the slowdown in the world's second-largest economy and as the global bond rout prompted investors to dump government bonds in the region.

WSJ: Asian Currencies Hit by Bond Market Turmoil

Following the global bond selloff and the recent rise in oil prices, the region’s bonds are beginning to show signs of outflows with yields, which move inversely to prices, inching higher in recent days. As investors’ risk appetite wanes, analysts from Morgan Stanley say currencies that have seen outsize inflows in recent months will be most vulnerable. They point to Thailand’s baht and note that the Korean won, Taiwanese dollar and Singapore dollar “also appear exposed, given the magnitude of inflow over the past month.”

As economies in the region grapple with a broadly stronger U.S. dollar and looser monetary policies, currencies have become the only tool for central bankers to spur growth. Weaker currencies can help languishing export sectors.

WSJ: China Market Fails to Lift Other Boats
iFeng: 新兴市场货币人气"急剧"恶化 人民币意外"独领风骚"