Investors increased long positions on most Asian currencies, a Reuters poll found, as a firmly dovish US Federal Reserve and aggressive US fiscal stimulus kept the dollar under pressure, aiding prospects for riskier emerging market currencies.
Bullish bets were the strongest for currencies of export-focused nations such as China, Singapore and Taiwan, the fortnightly poll of 13 respondents showed, while short views on the Indian rupee rose as COVID-19 infections raged across many parts of the country.
The dollar jumped to a two-week high on Wednesday as talks of asset purchase tapering grew in the face of strong US economic data. Most analysts, however, called the talks a knee-jerk reaction, and Fed officials also reiterated their dovish view.
“In the long run, the Fed may end up being one of the early movers to unwind loose policy among developed nations… but a lack of unwinding of quantitative easing or hesitation to do so this year may still offer upside support to Asian FX,” said Daniel Dubrovsky, analyst at DailyFX.
“In the short run, there may be some room for further weakness in the greenback if bond markets remain quiet.”
Long bets on the yuan were at their highest since Feb. 25, with the currency hovering at a two-month high as China leads Asia’s economic rebound without the shackles of a resurgence in COVID-19 infections that its neighbors are facing.
Sentiment also held strong for the Taiwan dollar, with bullish positions at their highest since Feb. 11. The island’s exports likely rose for a 10th straight month in April, as demand for electronic goods continues. – Reuters
