By Rashmi Ashok
(Reuters) – Investors rolled back short positions on most Asian currencies over the past two weeks, a Reuters poll showed, as risk appetite picked up after the United States and China agreed to restart trade talks.
News that the world’s two largest economies would return to the negotiation table in early October was cheered by markets, with bearish bets on the Chinese yuan
Reduced prospects of a no-deal Brexit and a possible breakthrough in Hong Kong’s political standoff also helped investors raise views on Asian units and reduce safe-haven holdings.
The poll was closed on Wednesday, before a surprise announcement from U.S. President Donald Trump delaying scheduled tariff hikes on billions of dollars worth of Chinese goods.
Short positions in currencies of export-focused economies were also shaved, with sentiment toward the Korean won
This spot of relief comes as worries over cooling demand from the region’s largest trading partner, China, has begun to ease.
Meanwhile, bulls seized hold of the Indonesian rupiah
A series of rate hikes last year has led to high real interest rates in the country, which helped to keep inflation in check and smoothed over currency volatility, attracting a large number of carry plays.
“The central bank has done a good job in terms of stabilizing the rupiah,” said Sim Moh Siong, a FX strategist at Bank of Singapore.
“There is some silver lining in terms of the U.S.-China trade talks, and given that inflation is low and the Fed is cutting rates, the rupiah is now reaping the dividend from the central bank’s efforts to stabilize it in the past.”
Bullish positions on the Thai baht
Short positions on the Indian rupee
The data prompted a selloff in the equity market and brought expectations of a rate cut in October back to the table.
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.
(Reporting by Rashmi Ashok in Bengaluru, additional reporting by Shriya Ramakrishnan and Shreya Mariam Job; Editing by Subhranshu Sahu)