Bullish bets on Asian currencies recede; yuan bears re-emerge

Investor sentiment towards most Asian currencies, especially the Chinese yuan, turned sour over the past two weeks, a Reuters poll showed, on fading hopes for a quick truce in the Sino-US trade spat ahead of impending tariffs on China.

Short bets on China's yuan, which has suffered from the prolonged tariff war, were at their highest in over a month, a poll of 15 respondents showed on Thursday.

US President Donald Trump doused expectations earlier this week by suggesting that a trade deal with China might have to wait until after the 2020 presidential election. The planned tariffs on remaining Chinese imports are set to kick in mid-December, unless there is any significant progress in negotiations.

Global markets have been whipsawed by conflicting headlines on the damaging trade war, while disagreements on Hong Kong and Xinjiang issues complicated relations between two of the world's largest economies.

A majority of the poll participants responded by 0430 GMT on Wednesday, before Bloomberg reported that Washington and Beijing are closer to agreeing on how many tariffs would be rolled back in a "phase one" trade deal.

Investors switched to bearish positions on South Korea's won for the first time since late-October. Asia's fourth-largest economy, among the hardest hit by the 17-month trade dispute, is headed for its slowest pace of growth in a decade with exports in November plunging for the twelfth month in a row.

Long positions in currencies of other export-focused economies were also shaved, with sentiment souring towards the Singapore dollar, Malaysian ringgit and the Taiwan dollar.

Bearish bets on the Indian rupee were at their highest since mid-September, amid persisting slowdown concerns.

The Reserve Bank of India left its key lending rate on hold in a surprise decision on Thursday and sharply reduced its economic growth forecast for the year through March.

"INR has been relatively resilient, given a significant pick-up in foreign equity inflows in Q4 on the back of Indian tax reforms," Wei-Liang Chang, an FX and Credit macro strategist at DBS Bank said.

Markets slightly scaled back long positions on the Indonesian rupiah and the Philippine peso.

The Thai baht, Asia's top performer so far this year, was the sole currency in the region to see an increase in bullish bets.

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 US dollars.