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Published on 25/06/2020 11:17:25 AM | Source: Reuters

Investors cut back on Asian FX positions as second-wave risks mount: Reuters poll

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By Nikhil Nainan

Fearing a second wave of COVID-19 infections, investors cut positions on most Asian currencies in favour of the near-term appeal of the U.S. dollar, a Reuters poll showed, choosing instead to nervously wait and watch the pace of the reopening of the global economy.

Optimism about a swift economic recovery has been rattled with fresh outbreaks in Beijing, several U.S. states seeing record infections and flare-ups in parts of Europe and India.

A poll of 15 respondents showed a sharp drop in long bets on Indonesian rupiah, a move closer towards bearish territory for the Philippine peso and Singapore dollar and investors turning short on the South Korean won again.

"A start-stop recovery cannot be totally discounted," Wei Liang Chang, a macro strategist at DBS Bank, said about the new wave of infections globally and that regional currency gains will likely be held back.

In Indonesia, where new cases are numbering around 1,000 a day, investors are preparing for further easing by the central bank this year as the economy gets hammered by the pandemic.

Bank Indonesia cut rates for a third time this year, bringing its benchmark policy rate to the lowest in two years amid growing calls from lawmakers to do more. Further easing would dent the appeal for one of Asia's highest-yielding currency.

Investors also trimmed long bets on the Thai baht.

The country's central bank left rates unchanged on Wednesday, after all the poll responses came in, and said it expects the export- and tourism-reliant economy to contract by the sharpest rate on record this year.

However, some economists figured that Thailand's central bank is unlikely to ease interest rates further, given that the lender has cut rates five times since last August.

The baht has been appreciating in recent months, with gold prices surging, helping to cap the sharp drop in exports and lend support to the currency.

"The currency continues to enjoy the backing of a large external surplus, besides the prospect of a stable interest rate policy," ING economist Prakash Sakpal wrote in a note after the rate decision.

Meanwhile, the Philippine central bank is expected to hold off on cutting rates further at its meeting later in the day, a separate Reuters poll showed.

 

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 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 Nikhil Kurian Nainan in Bengaluru, Editing by Sherry Jacob-Phillips)