Investor Confidence in Asian Currencies Wanes as Tariff Risks Rise

Investor sentiment toward Asian currencies has shifted notably, with long positions fading and short bets increasing amid renewed global trade tensions and political uncertainty. According to a recent Reuters poll of foreign exchange strategists, bullish bets on several regional currencies have weakened, while the Indian rupee in particular faces its most bearish outlook in five months.

The shift comes after U.S. President Donald Trump warned of potential tariff hikes on Indian imports, in response to India’s continued purchase of discounted Russian oil. This triggered a surge in short positions on the rupee, as investors feared economic retaliation could pressure India’s trade balance and growth outlook. Although the Reserve Bank of India held interest rates steady as expected, the move did little to calm sentiment.

Elsewhere, long positions on the Chinese yuan dropped to a one-year low, and confidence in the Taiwan dollar fell to its weakest since early 2024. Both currencies are seen as vulnerable to escalating geopolitical risks and trade realignments in the tech sector. The South Korean won, Philippine peso, and Indonesian rupiah also saw a rise in bearish bets, reflecting broader market caution.

In contrast, the Singapore dollar, Malaysian ringgit, and Thai baht maintained relative strength. These currencies continue to benefit from political stability, healthy current account balances, and less exposure to tariff threats compared to their regional peers.

The data highlights growing investor unease across Asian FX markets, with traders closely watching developments in U.S. trade policy, upcoming central bank decisions, and the pace of China’s economic recovery. While the U.S. dollar remains under pressure, safe-haven demand and uncertainty over Fed appointments are adding further complexity to the currency outlook.