Investors strengthened bearish positions on most Asian currencies, especially the Singapore dollar over the past two weeks, a Reuters poll showed, as the deepening economic impact of a deadly virus epidemic in China dampened risk appetite.
Short positions on the Singapore dollar were at their highest since late August 2019, a poll of 18 respondents showed on Thursday. While Beijing has stepped up stimulus measures to prop up its economy, concerns persist about supply chain disruptions and the spillover effect on regional economies with strong trade and tourism links to China.
Both Singapore and Thailand have cut economic growth forecasts for the year. "Even with stimulus measures rolled out by policymakers, respective currencies will likely have a weakening bias, as they are being relied on to help ease economic pressures on these affected economies," Han Tan, market analyst at FXTM said.
Bearish bets on the Chinese yuan and South Korean won were at their highest since early October last year, while sentiment also soured towards the Malaysian ringgit. Market participants remained wary on the outlook for the Thai baht, with short positions on the currency at their highest since July, 2018. The baht, which was an investor darling in 2019 due to its large current account surplus, has weakened and become Asia's worst performing currency so far this year.
Long positions on the high-yielding Indonesian rupiah were trimmed ahead of the central bank meeting later in the day where only a slim majority of analysts expect Bank Indonesia to resume its easing cycle. The Philippine peso was the sole currency in the region to see an increase in bullish positions.
"The PHP has been supported by above average yields, and an improvement in the current account balance," Wei-Liang Chang, an FX and credit macro strategist at DBS Bank said. Both the rupiah and peso have outpaced their Asian peers so far this year, benefiting from their carry trade appeal in a low interest rate environment and relatively lower exposure to the economic fallout of the virus outbreak.
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.
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