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Short bets on China's yuan near 8-month high as Sino-U.S. tensions rise: Reuters poll

Nikhil Nainan
·2-min read

By Nikhil Nainan

BENGALURU (Reuters) - Short bets on China's yuan rose to a near eight-month high, a Reuters poll showed, as Beijing's proposed security bill for Hong Kong fuelled worries of a global fallout just as it tries to kick-start a post-lockdown economic recovery.

The yuan is hovering at its weakest level against the U.S. dollar in nearly nine months as U.S.-China tensions once again build, with President Donald Trump saying his country was working on a strong response to Beijing's actions.

Short positions on the yuan climbed to their highest since October last year, a poll of 14 respondents showed.

"Markets are increasingly apprehensive of U.S. sanctions in response to China introducing a National Security Law for Hong Kong," said Wei Liang Chang, a macro strategist with DBS, adding that political considerations would be the prominent driver for the currency in the near term.

In India, where strict nationwide lockdown measures are being eased gradually, investors cut short bets on the rupee to the lowest since February, with low oil prices providing some respite.

Economists in a separate Reuters poll predict the economy to have expanded at its slowest pace in at least eight years in the March quarter. Meanwhile, Goldman Sachs expects a 45% contraction in the current quarter ending in June, when the full-force of the damage from the pandemic will be felt.

Elsewhere, bets on Indonesia's rupiah turned bullish for the first time since the end of February, albeit marginally.

"Panic in markets has dissipated and risk sentiment is picking, which is positive for higher-yielding currencies such as the IDR," Wei Liang said, referring to the rupiah.

The currency has been re-gaining ground since the country raised dollar bonds and its central bank secured a $60 billion repo line with the U.S. Federal Reserve to ease worries of dollar liquidity as the COVID-19 crisis took hold and caused an exodus of capital.

Investors also strengthened bearish positions on the South Korean won and the Singapore dollar.

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).

(Reporting by Nikhil Kurian Nainan and polling by Rashmi Ashok in Bengaluru; Editing by Subhranshu Sahu)