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Bearish bets return on rupiah as investors wary of cenbank law revision: Reuters poll

BENGALURU (Reuters) - Investors turned short on the Indonesian rupiah again in stark contrast to other Asian currencies, a Reuters poll showed, on concerns that the central bank’s policymaking could be at risk from political interference.

FILE PHOTO: An employee wears synthetic gloves as she counts Indonesia's rupiah banknotes at a currency exchange office amid the spread of coronavirus disease (COVID-19) in Jakarta, Indonesia, March 19, 2020. REUTERS/Willy Kurniawan/File photo

The reversal came just two weeks from the previous Reuters poll where investors turned bullish on the rupiah for the first time since June, and bets on all nine Asian currencies were long.

But with the dollar steadying after a fourth straight monthly decline, long bets on most Asian currencies have been trimmed, the fortnightly poll of 13 respondents showed.

The rupiah has dropped about 1.5% since a parliamentary panel recommended changes to the central bank law last month.

The government has looked to quell worries over Bank Indonesia’s autonomy at a time when the economy is sliding into recession and facing pandemic-led debt monetisation, while the capital Jakarta has resumed coronavirus restrictions.

Societe Generale, in a note earlier this week, said it expects the rupiah to be the worst-performing Asian currency in the second half of the year, and continue to underperform its high-yielding peer, the Indian rupee.

Bank Indonesia is widely expected to keep its key policy rate unchanged at its meeting later in the day.

Long bets on China’s yuan, South Korea’s won, Singapore’s dollar and the Malaysian ringgit collectively fell off 2018 highs, but investors remained firmly bullish on them.

The responses came in before the U.S. Federal Reserve said on Wednesday it will keep interest rates near zero until inflation picks up, giving fresh support to the dollar.

Further data this week from China suggests that recovery in the world’s second-largest economy is gathering pace at a time where the global picture remains uncertain.

However, “persistent upside surprises to activity data reduce the probability that the government eases policy further,” Goldman Sachs said after the flood of data on Tuesday.

Investors also cut long positions on the rupee that were raised to a three-year high in the previous poll.

The currency has been gradually losing some ground against the dollar in September, but remains well-below levels it was at through most of August.

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).

Reporting by Nikhil Kurian Nainan in Bengaluru, Editing by Sherry Jacob-Phillips