Investors trimmed their bearish positions on emerging Asian currencies over the past two weeks, a Reuters poll showed, although escalating Sino-US tensions worsened the mid-term outlook for regional units.
Risky asset classes such as regional equities and currencies were battered over the past few months amid a deepening dispute on trade the United States and China.
US President Donald Trump's administration on Tuesday threatened China with 10 percent tariffs on $200 billion worth of Chinese imports, prompting a tumble in equity and foreign exchange markets.
China has threatened to retaliate, but did not specify how.
Recent dollar strength also weighed on Asian units. The currency stood at a six-month high against the yen, bolstered by expectations that the US Federal Reserve would hike interest rates two more times in 2018.
In Asia, bearish bets on the Chinese yuan eased slightly, the Reuters poll of 13 respondents showed. But a majority of poll responses came in before the US announced the plan for much wider tariffs on China goods.
China's foreign exchange reserves unexpectedly rose in June, helped by an increase in the value of its US Treasury holdings.
June exports, to be announced on Friday, are also expected to have picked up, according to a Reuters poll.
However, many have expressed concerns over slowing economic
growth in the country, and such worries have deepened following
escalation of the trade fight with the US.
On Thursday, the yuan fell against the dollar following the central bank's weakest daily fixing in nearly a year and after Washington's fresh tariff threats knocked the currency lower.
In the poll, the Philippine peso had the highest level of bearish bets. The peso has been undercut by the country's weaker economic fundamentals this year.
The Philippines' trade deficit further widened in May to a five-month high.
Short positions on the ringgit narrowed, as sentiment about the currency was bolstered by Malaysia's solid economic fundamentals.
The Malaysian central bank kept its key interest rate steady on Wednesday, and said the economy was likely to "remain on a steady growth path."
Bearish positions on the Indian rupee also fell slightly, although the currency has largely underperformed peers this year.
The rupee hit a record low against the dollar last month, hurt by rising oil prices as well as reduced risk sentiment over emerging markets.
Indian inflation likely climbed to a near two-year high in June, a Reuters poll showed. The readings, due at 1200 GMT on Thursday, may prompt the reserve bank to hike rates again in August.
Bearish positions on the Singapore dollar declined. However, its economy likely expanded at a slower pace in the second quarter as manufacturing lost momentum, a Reuters survey showed.
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 US dollars.
The figures include positions held through non-deliverable forwards (NDFs).