Investor sentiment towards most Asian currencies has turned increasingly positive, with market participants ramping up bullish positions as the US dollar continues to grapple with pressure stemming from uncertainty surrounding President Donald Trump’s trade policies, a Reuters poll revealed Thursday.
The fortnightly survey, encompassing the views of 10 analysts and fund managers, showed a clear trend towards increased optimism for regional currencies.
Respondents significantly increased their long positions – bets that the currency will appreciate against the US dollar – on the Singapore dollar, the Indian rupee, the Thai baht, and the Philippine peso.
Furthermore, a notable shift occurred as investors turned bullish on the South Korean won, the Taiwan dollar, and the Malaysian ringgit for the first time since October last year.
This growing confidence reflects the dollar’s recent struggles; the US currency suffered its weakest monthly performance in two-and-a-half years during April, primarily due to tariff tensions sparking fears of a global economic slowdown and consequently denting the appeal of US assets.
Dollar stabilizes tentatively, but undercurrent remains
While the greenback has shown some signs of stabilization more recently, partly aided by tentative indications of progress in broader trade negotiations (including with China, the target of the highest US levies), the underlying pressure persists.
Parisha Saimbi, an EM Asia FXLM strategist at BNP Paribas, acknowledged the recent stability but highlighted the potential for continued support for Asian currencies.
“With risk sentiment stabilizing on tentative signs of a U.S.-China de-escalation and the bond-vigilant US administration helping to curtail a UST sell-off, Asian currencies could be somewhat supported tactically,” she commented.
Philippine peso leads gains
Among the regional currencies, bullish bets on the Philippine peso reached their highest level since mid-September. The peso enjoyed a strong April, gaining 2.6% against the dollar.
Analysts at Barclays suggested this strength stems partly from a market narrative perceiving the Philippines as relatively more insulated from direct tariff threats compared to some neighbors, facing comparatively modest 17% levies.
Conversely, while analysts trimmed their bearish (short) positions slightly on the Chinese yuan and the Indonesian rupiah, sentiment towards the rupiah remained firmly negative overall.
The Indonesian currency has been under pressure since March due to concerns regarding the country’s fiscal health and specific government policies.
Its sharp fall to a record low in early April prompted intervention from Bank Indonesia (BI) to support the currency, including holding policy rates steady last week to promote stability.
Despite the rupiah’s recent weakness, BNP Paribas’ Saimbi sees potential for a turnaround.
“Valuations are attractive to turn tactically long on the rupiah now,” she suggested, adding that there is “scope for some portfolio inflows if risk sentiment stabilizes,” potentially allowing the rupiah to catch up with its regional peers.
The latest results clearly indicate a growing preference among market participants for holding Asian currencies over the US dollar.
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