Asia FX bulls retreat after Middle East conflict dents risk appetite: Reuters poll

By Himanshi Akhand (Reuters) -Investors trimmed long positions in most Asian currencies as the conflict between Israel and Iran pushed oil prices higher and drove safe-haven flows into the U.S. dollar, a Reuters poll showed on Thursday. Bullish bets on the South Korean won, the Taiwan dollar, the Indonesian rupiah and the Malaysian ringgit eased slightly from a fortnight ago, according to the poll of 11 respondents. Asian currencies logged losses last week as a raging conflict between Iran and Israel, which settled into a delicate truce earlier this week, made investors risk averse and sent them seeking refuge in the dollar. Rising oil prices added to the pressure as most emerging Asian economies, except Malaysia, import the bulk of their oil requirement and an increase in prices weighs on current account deficits.

Market volatility in recent weeks has been driven by two conflicting factors - geopolitical risks and the prospect of a Federal Reserve rate cut, said Christopher Wong, currency strategist at OCBC, adding that in the Asian context, key concerns also include oil prices and the growth outlook. Investors turned bearish on the Philippine peso for the first time since early-March. The peso has weakened about 1.4% this month as the country is one of the most exposed to oil price shocks among regional peers. Moreover, the Philippine central bank delivered a widely expected second straight policy rate cut last week and left the door open for at least one more reduction this year to support growth. Bearish bets on the Indian rupee also firmed.

Investors had turned short on the currency for the first time in two months a fortnight ago after the country’s central bank delivered a larger than expected 50-basis-point cut. Parisha Saimbi, an FX strategist at BNP Paribas (OTC:BNPQY), said that the upcoming dividend payment season in India could further weigh on the rupee. Bullish bets on the Thai baht were reduced significantly as political risks clouded the prospects of Southeast Asia’s second largest economy. The Thai Prime Minister Paetongtarn Shinawatra has come under intense public pressure over her handling of an escalating border row with neighbouring Cambodia, which led to a key ally walking out of the coalition last week, vowing to seek a no confidence vote. Most of the poll responses were received before the Bank of Thailand left its key interest rate unchanged on Wednesday.

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).

The survey findings are provided below (positions in U.S. dollar versus each currency): DATE USD/CNYUSD/KRWUSD/SGDUSD/IDRUSD/TWDUSD/INRUSD/MYRUSD/PHPUSD/THB 26-Jun-25 -0.74 -1.06 -1.22 -0.20 -1.48 0.89 -0.76 0.21 -0.33 12-Jun-25 -0.78 -1.37 -1.24 -0.60 -1.58 0.03 -1.25 -0.93 -1.24 29-May-25 -0.67 -1.20 -1.34 -0.32 -1.50 -0.08 -1.04 -1.19 -1.14 15-May-25 0.00 -0.22 -0.54 0.70 -1.01 -0.19 -0.15 -0.68 -0.45 01-May-25 0.20 -0.06 -0.67 1.27 -0.53 -0.58 -0.40 -1.02 -0.61 17-Apr-25 0.57 0.19 -0.26 1.33 0.06 -0.20 0.04 -0.65 -0.30 03-Apr-25 0.47 1.13 0.54 1.20 1.14 0.01 0.33 -0.15 0.40 20-Mar-25 0.24 0.72 0.15 0.97 0.85 1.09 0.42 -0.13 0.08 06-Mar-25 0.77 1.00 0.34 1.36 0.71 1.47 0.45 0.20 0.48 20-Feb-25 0.88 0.83 0.31 1.06 0.59 1.22 0.37 0.31 0.02