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Short bets build on Asian currencies on Trump tariff concerns

Investors fortified their short positions on most emerging Asian currencies as U.S. President-elect Donald Trump’s pledge to impose additional tariffs on China threatens trade-reliant economies such as Malaysia and Singapore.

Bearish bets on the Singapore dollar SGD= were at their highest in more than two years, while those on the Indonesian rupiah IDR= stood at a five-month high, a Reuters poll of 11 respondents showed on Thursday.

Short views on the Malaysian ringgit MYR= ticked higher over the previous poll, and were the most unfavourable since mid-July this year.

The ringgit is the best-performing currency in the region – up 3% so far this year – and the only unit trading in the black. However, the currency is headed for a second straight monthly decline as investors booked profits after months of strong gains.

Trump’s pledges of big tariffs on China, Mexico and Canada this week, which risk fanning inflation globally and could result in a shallower Federal Reserve easing cycle, also sent investors fleeing risk-sensitive emerging market assets including the ringgit.

“Policy uncertainty associated with Trump presidency is likely to see renewed volatility for the region,” said Christopher Wong, currency strategist at OCBC.

Ringgit can be highly sensitive to moves in the yuan and U.S. interest rates, Wong said.

“In the adverse scenario that the yuan weakens and higher U.S. rates, the ringgit could be exposed to further depreciation pressure.”

Poon Panichpibool, a markets strategist at Krung Thai Bank, said if Trump’s tariffs were to come into play soon enough it could have a bad spell for emerging Asian currencies, reminiscent of his first term in 2016.

Respondents to the poll continued to hold the most unfavourable view of the South Korean won KRW=KFTC due toits sensitivity to the yuan, and a large trade surplus with the U.S. implies tough times ahead as Trump’s tariffs play out.

Most responses to the poll came before the Bank of Korea’s (BOK)surprise interest rate cut on Thursday and a signal of more reduction as growth falters.

The rate cut signalled that the BOK’s policy priority is growth, not short-term financial market stability, ING analysts said in a note.

More rate cuts will add depreciating pressures on the won, ING analysts said and forecast a weaker unit in the first half of 2025 with increased volatility.

Elsewhere, short bets built up on the Chinese yuan CNY=CFXS, Taiwan dollar TWD=TP, and the Indian rupee INR=IN, while those on the Thai baht THB= and the Philippine peso PHP= eased marginally.

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).
Source: Reuters (Reporting by Shivangi Lahiri and Sameer Manekar in Bengaluru; Editing by Eileen Soreng)

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