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Investors Turn Bearish About Chinese Yuan, Asian Currencies

A recent Reuters poll indicates a change in attitude among investors as they severely reduce long bets on the Chinese yuan and go short on most of the Asian currencies amid rising expectations for rapid economic recovery in the US. Expectations have also turned against the riskier currencies from Asia on account of the recent strengthening in US Treasury yields that have turned the dollar bullish, going against economists’ forecasts for the reserve currency.

Even as the overall market sentiment improves on the back of COVID-19 vaccine rollout, rising US Treasury yields have severely affected the demand for emerging market currencies, making the US dollar appealing for investors again. Besides, the rollout of more fiscal stimulus measures strongly increases the likelihood of the US posting a more rapid recovery from the pandemic-inflicted damage than its major peers.

Since July 2020, investors had been bullish on the Chinese yuan as the Chinese economy seemed poised to post a strong rebound after bringing the initial coronavirus outbreak under control swiftly. However, economists recently polled by Reuters have switched to a bearish outlook on the Chinese yuan lately.

Meanwhile, investors have also turned short on other leading Asian currencies, including the South Korean won, Singapore dollar and Malaysian ringgit. They have also turned bearish about the outlook for the Indonesian rupiah for the first time since October 2020, with the currency losing more than 2% of its value over the past couple of weeks.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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