Short positions sustain for most Asian currencies as trade war rages on: Reuters poll

June 6, 2019

By Ambar Warrick

(Reuters) – Short positions on most Asian currencies persisted over the past two weeks, a Reuters poll showed, as an escalating trade standoff between the United States and China saw investors holding little faith in regional risk assets.

All 14 participants in the poll were bearish on the Chinese yuan as the country threatened to retaliate against fresh American tariffs on its exports. May was the worst month for the currency in eleven.

Weak economic readings from China, as a result of the trade conflict, have also dampened the outlook for most regional players that depend heavily on the world’s second largest economy as a trading partner.

Bearish positions on the South Korean won were steady, while short bets on the Taiwan dollar were at their strongest in nearly 3-1/2 years. All 14 participants in the poll were bearish on both currencies.

U.S. scrutiny of Chinese technology majors, in addition to a wider sell-down in technology stocks has further sullied demand for the electronic components made and exported by the two countries.

Bullish bets on the Indian rupee receded as investors perceived further headwinds to the import-heavy economy from Sino-U.S. trade tensions.

The recent ending of preferential trade treatment for India by the United States also came as a major blow to positions on the rupee, adding to worries over sustainable economic growth as well as a shortage of jobs in the country.

Short bets on the Malaysian ringgit edged up to levels last seen in November 2016.

Bucking the trend, investors turned bullish on the Thai baht as the expected parliamentary confirmation of military junta leader General Prayuth Chan-ocha as civilian prime minister concluded a largely splintered election process.

While trade headwinds are expected to weigh on Thailand’s economic growth this year, the country’s economy has been largely stable in comparison to its regional peers through a mix of strong exports, manufacturing and local consumption.

The baht has outperformed its peers this year, rising about 3.7%.

Short positions on the Indonesian rupiah eased slightly, as investors took in the prospect of sustained economic policy reforms in the country after incumbent President Joko Widodo retained power.

Ratings agency S&P had raised the country’s sovereign credit rating last month, citing as much.

The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht.

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 the market is significantly long U.S. dollars.

The figures include positions held through non-deliverable forwards (NDFs).

(Reporting by Ambar Warrick, polling by Aby Jose Koilparambil in Bengaluru; editing by Gopakumar Warrier)

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