(Reuters) – Investors piled bullish gains on most Asian currencies, a two-week Reuters survey on Thursday as concerns the coronavirus pandemic hobbles a future recovery in the US economy obscure the dollar’s outlook.
FILE PHOTO: Chinese banknotes of Yuan and US dollars are seen in this illustration taken February 10, 2020. REUTERS / Dado Ruvic / Illustration
By climbing infection levels, a stagnant bill for coronavirus, weak job data and escalating tensions with China have driven investors out of the traditional security of the dollar, the greenback has. DXY published its largest monthly case in a decade in July.
Markets should support further weakness in the dollar as liquidity is plentiful due to Federal Reserve action, said Wei-Liang Chang, macro strategist at DBS Bank, adding that the currency would remain on hold until the presidential election in November.
Singapore’s dollar SGD = and South Koreans won KRW = KFTC were the biggest beneficiaries of the US dollar’s return, the survey of 17 respondents showed.
Bullish bets on the Singapore dollar touched a peak of eight months, while those that have won have more than doubled to their highest since December 2018.
“The outlook for global trade appears to be improving from very depressed levels, as evidenced by the sharp recovery in PMI figures for purchasing managers in China and across the region,” added DBS analyst Wei-Liang Chang.
Disruptions from the pandemic are slowly being alleviated and most economies have opened up significantly, giving rise to increased expectations that global trade will increase due to strong fiscal and monetary stimulus, he added.
Earlier this month, data showed South Korea’s exports slowed at its slowest pace in four months in July, beating expectations. Singapore’s retail sales rose steadily in July, indicating that consumption spending increased after the restrictions.
At the same time, investors held on to their long positions on the Chinese yuan CNY = CFXS since turning bullish in July, as largely positive factory data and assurances from the central bank that the economic recovery was underway kept the spirits high.
Investors went long on Thailand’s baht THB = TH, and reverse positions from two weeks ago as the central bank’s policy easing cycle seemed to have stopped after three cuts this year.
Short-term investments in Indonesia’s rupiah IDR = ID were trimmed despite a peak in coronavirus cases and market expectations of a further interest rate cut after a lot of disappointing economic data.
The Asian currency positioning survey focuses on what analysts and fund managers believe are the current market positions in nine Asian emerging markets: the Chinese yuan, the South Korean won, the Singapore dollar, the Indonesian rupee, the Taiwan dollar, the Indian rupee, the Philippine peso, Malaysian ringgit baht and the Thai ringgit baht.
The survey uses estimates of net long or short positions on a scale from minus 3 to plus 3. A score of plus 3 indicates that the market is significantly long US dollars.
The figures include positions held by non-deliverable forwards (NDF).
Reporting by Anushka Trivedi in Bengaluru; Editing Subhranshu Sahu