As inflation expectations improve, Asian currency bears withdraw.

Short bets on the Thai baht fell substantially after the country's first rate hike in nearly four years, according to a Reuters poll, as bearish bets on emerging Asian currencies lessened on hopes that monetary tightening will moderate raging inflation.

According to a twice-weekly survey of 12 analysts, short holdings on all developing Asian currencies decreased, with bets on the Chinese yuan reaching their lowest level since late April.

Short positions on the Singapore dollar, Indonesian rupiah, and Philippine peso all hit multi-month lows.

The first noticeable hint of comfort following consistently rising prices was an unchanged U.S. inflation print for July, which also contributed to the improvement in the region's mood.

After the Bank of Thailand (BoT) on Wednesday increased its interest rate by 25 basis points, kicking off its tightening cycle after behind regional peers, short bets on the Thai baht fell to their lowest level since early June.

As tourists start to return, Thailand, which is heavily dependent on tourism, has begun to show signs of a slow economic recovery, allowing the BoT to adjust its monetary policy.

The BoT is anticipated by analysts to continue gradually normalizing policy for the remainder of the year.

The baht, one of the least shorted currencies in the survey, has increased by almost 4% since the beginning of this month and appears to be headed for a comeback.

In the first seven months of the year, the currency lost 10.2% of its value.

After the Thai central bank announced the rate increase, the majority of poll replies were received.

The Indonesian rupiah was also one of the least shorted currencies, despite calls for Bank Indonesia (BI) to raise interest rates due to growing inflation and prospects of a global recession. The country's economy is still on course for recovery.

One of the last nations in the area to continue its loose monetary policy from the epidemic era is Indonesia, the largest economy in Southeast Asia.

In a meeting later this month, analysts at Citi and OCBC anticipate BI to increase its benchmark seven-day reverse repurchase rate. Citi anticipates a 25 basis point increase.

Maybank and ANZ, on the other hand, do not anticipate the central bank rushing to tighten.

In other markets, short bets on the South Korean won, Taiwan dollar, and Indian rupee slipped to their lowest levels since April 21.

The Asian currency positioning survey focuses on the current market positions of nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit, and Thai baht.

On a scale from -3 to +3, the survey uses estimates of net long or short holdings. A score of plus three means the market has a sizable long position in US dollars.

The positions held through non-deliverable forwards are included in the figures (NDFs)