On Thursday, there was a rise in bearish bets on the Thai baht because of risks around the Chinese economy, a possible recession, and inflation.
Meanwhile, there was a slight easing in short bets placed on most Asian currencies, but they still remained close to their highs of several months.
Short bets rise
The short bets on the currency of Thailand have been building up steadily since early March and reached their highest value on Thursday, last seen in January 2018.
This is because the Russian invasion of Ukraine triggered a number of factors and put the net oil importing and tourism-dependent country under pressure.
The second-largest economy in Southeast Asia, Thailand is one of the countries that has been lagging behind in terms of policy normalization.
Its peers and numerous major central banks have hopped on the normalization bandwagon for some time now.
This has further increased the risks of a negative impact of increasing costs, combined with weak activity in the region’s top economy i.e. China.
The Thai currency
The Thai baht is the most shorted currency amongst other Asian counterparts, and it has depreciated almost 14% since the Russia and Ukraine conflict began.
This year, the currency has come down by 10.3%, which means that it has reached the bottom with the South Korean won and the Indian rupee.
Market analysts said that participants would remain short on the Thai currency against the US dollar until they are certain that the US Federal Reserve is no longer going to be aggressively hawkish.
However, investors could become bullish on the Thai baht because of the weakness in the US dollar after the meeting of the US Federal Reserve.
This could also be because of the recent pickup in tourism in Thailand as well as the economy.
Hawkish sentiment still exists
In its Wednesday meeting, the US Federal Reserve raised the interest rate once more by 75 basis points and reiterated that it would fight against the soaring inflation.
The Fed said that it would not back down in its fight against inflation in the world’s biggest economy, even if it meant a slowing jobs market and the risk of economic slowdown.
However, analysts said that even though the dollar had declined after the meeting, the chairman of the Fed, Jerome Powell, was still hawkish and this could mean that the central bank remains aggressive.
This would ultimately provide support to the safe-haven greenback, which would not bode well for the Thai baht.
Elsewhere, there were improvements in the sentiment toward the Philippine peso, after an off-cycle increase in the interest rate of 75 basis points by the Bangko Sentral ng Pilipinas.
The second-least shorted currency in Asia was the Chinese yuan, which is considered a safer bet among all Asian currencies.
There was a slight moderation in the short positions on the Indonesian rupiah, Indian rupee, and the Malaysian ringgit, but they still remained firm
The Asian currencies are struggling with most other global currencies because of inflation and the economic environment.
