2021 outlook on Asia FX brightens

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    “For the time being, markets may be focusing on COVID-19 vaccine prospects as well as US fiscal stimulus hopes. So, US-China tensions may come back into play as the Joe Biden administration gets going,” said Daniel Dubrovsky, an analyst at DailyFX.

    Long bets on the Thai currency rose to their highest since January but were at relatively lower levels compared to other export-sensitive currencies, as political tensions and growing central bank discomfort over the baht’s appreciation weighed.

    The Bank of Thailand (BOT) on Wednesday said it stepped in to slow volatility in the baht so that it would not derail economic recovery, after the currency strengthened to a one-year high of 29 baht per US dollar.

    “Theoretically, the Bank of Thailand could have infinite room to weaken its currency if it continues to accumulate foreign exchange reserves,” said DailyFX’s Dubrovsky, pointing out that reserves clocked in just shy of an all-time high in November-end at $254 billion.

    “The risk for the BOT is to balance its efforts, as sudden announcements or aggressive intervention could scare away investors and induce capital flight… it will be pertinent to keep a close eye on their efforts.”

    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.