Bears Dig in on Asian Currencies as Trade War Reignites

Asian: In a Reuters poll, investors bet most Asian currencies will come under further pressure, with trade tensions between the United States and China firmly dominating headlines once again.

With diminishing hopes of a long-awaited trade deal between the world’s top two economies, the mood across markets have been apprehensive with investors shifting money to safer bets.

Investors, who were bullish on China’s yuan for much of this year until April end, have since raised their short positions to their highest in six months, the poll of 12 respondents showed.

Trade tensions have taken a toll on the Chinese economy, but measures promised by Beijing, including massive stimulus, have started to filter through. However, with tensions escalating again, the yuan has lost about 2.5% since U.S. President Donald Trump said on May 5 he was going to raise tariffs on $200 billion of Chinese imports.

Trade reliant economies, such as Taiwan and South Korea, are among the most exposed to the deterioration in trade relations.

The poll showed market participants raise their short positions on both country’s currencies over the last two weeks with bets on South Korea’s won at their highest in more than a decade, with a slew of weak domestic data adding to the unit’s woes.

It is the region’s worst performing currency, shedding over 6% against the dollar so far this year. A state-run think tank on Wednesday called on monetary policy in the country to be substantially accommodative.

Short bets on Taiwan’s dollar climbed to their highest since January 2016.

In India, the seven-phase general election process that lasted for more than a month culminates on Thursday with vote-counting.

Pound falls amid Brexit concerns; U.S.Dollar inches up after Fed minutes

On Thursday, the British pound fell in Asia amid Brexit concerns. The U.S. dollar inched up after the release of minutes from the last meeting of the U.S. Federal Reserve.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.1% to 97.982 by 11:46 PM ET (03:46 GMT).

Minutes of the Federal Open Market Committee’s April 30-May 1 meeting suggested that there is no strong case to move rates in either direction and that the Fed’s patient approach to rate-change would be appropriate “for some time.”

The FOMC at the meeting left its benchmark policy rate unchanged in a 2.25% to 2.5% target range as expected.

Markets expect that the Fed will cut interest rates by the end of the year amid concerns over inflation running persistently below its 2% target.

The GBP/USD pair fell 0.1% to 1.2647 after reports that U.K. Prime Minister Theresa May could resign as soon as today amid Brexit chaos caused a sell-off of the pound.

May proposed a revised version of the Withdrawal Agreement Bill to Parliament on Wednesday, but her cabinet and backbench lawmakers have reportedly revolted at the new version. Other reports suggested that members of parliament could put pressure on her to resign as soon as today.

Andrea Leadsom, a high profile Cabinet minister, resigned today and said she no longer believed the government’s approach.

The USD/CNY pair gained 0.1% to 6.9144. The Chinese currency received some support this week after the People’s Bank of China recent daily fixing for the yuan were at a stronger-than-expected level for a fourth straight day.