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Asian FX Sentiment Worsens As Recession Fears Grip Markets
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.
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Investors took short positions on all Asian currencies for the first time in more than a year, a Reuters poll showed, as an easing bias by most regional central banks and growing fears of a coronavirus-induced recession sapped risk appetite.
Coordinated easing by the U.S. Federal Reserve and its global counterparts has failed to quell panic in markets, with many worrying that central banks may have run of out of ammunition to combat the pandemic that has left thousands dead and put many countries under virtual lockdown.
Bearish positions in the Indonesian rupiah outpaced those of its peers to hit their highest since October 2018, according to a fortnightly poll of 13 respondents.
The rupiah is Asia's worst performing currency so far this year, despite increased market intervention by the central bank to stem capital outflows. On Thursday, the currency sunk to its weakest level since 1998.
Asian currencies have also come under pressure from a stronger dollar, as heightened uncertainty pushes investors to liquidate holdings across assets to cover steep losses.
"It is simply not the environment to encourage taking risks and thus even higher yielding Asia bonds do not appeal at present," Jingyi Pan, market strategist at IG Asia said.
Short bets on the Malaysian ringgit climbed. Following weeks of political turmoil, the country is now grappling with a jump in coronavirus infections and went into a two-week partial lockdown on Wednesday.
Investors turned bearish on the Philippine peso for the first time since October last year. The Philippines became the first country to completely close its financial markets on Tuesday due to the virus outbreak.
Bearish bets on the Chinese yuan, South Korean won and Singapore dollar were sharply raised, while market participants reversed long positions on the Taiwan dollar.
Concerns of a slowdown in Thailand's growth and its lucrative tourism sector soured prospects for the baht as short positions on the currency were raised for a fourth consecutive time, reaching the highest in more than four years.
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).