Bearish bets reduced on most Asia FX, trade worries pressure yuan: Reuters poll

By Rashmi Ashok

(Reuters) – Sentiment toward most Asian currencies turned less bearish, a Reuters poll showed, as a decline in new coronavirus cases prompted some countries to reopen their economies, but investors doubled down on short bets on the Chinese yuan.

Bearish positions on the yuan rose from a fortnight ago, a Reuters poll of 15 respondents showed, after the country’s trade relations with the United States soured even as the export powerhouse tries to regain footing amid a pandemic-fuelled slump in demand for its products.

“Recent statements by U.S. President Donald Trump have shown that a sudden spike in U.S.-China trade tensions remain a risk,” said Han Tan, market analyst at FXTM.

U.S. President Donald Trump said on Monday he opposed renegotiating the U.S.-China “Phase 1” trade deal signed in January, adding he wanted to see if Beijing lived up to the deal to massively increase purchases of U.S. goods.

“New or heightened tariffs before the U.S. elections in November could derail the global economy’s already-fragile post-COVID-19 recovery and trigger heightened volatility in the FX markets,” Tan added.

“Enveloping this entire narrative is the fact that China’s primary export markets are not buying as the world remains in a state of lockdown,” said Stephen Innes, chief global market strategist at Axicorp.

In a spot of relief for other Asian units, new infections were held in check and economies reopened, prompting market participants to scale back bearish bets on the currencies, the poll showed.

Investors were on the verge of turning bullish on the Thai baht as fresh cases dwindled. On Wednesday, the country reported no new daily cases for the first time in two months, prompting the government to consider easing curbs further.

Participants in the poll turned bullish on the Philippine peso for the first time since early March as restrictions were lifted, with curbs extended into June only in some cities that are hotspots.

Bearish bets on the Indian rupee were also trimmed to their lowest in over two months after the country announced a $266 billion support package involving a major extension of credit lines to businesses, while the country slowly eased curbs.

Short positions were trimmed on the Malaysian ringgit , Indonesian rupiah and South Korean won and increased marginally on the Singapore dollar .

The Reuters survey is focused on what analysts 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 included positions held through non-deliverable forwards (NDFs).

(Writing by Rashmi Ashok and polling by Anushka Trivedi in Bengaluru; Editing by Devika Syamnath)