Investor sentiment towards most Asian currencies soured over the past two weeks, as an escalation in the tit-for-tat Sino-U.S. trade war added to fears of a recession in the world's largest economy and fuelled a flight from risk assets.
Short bets on China's yuan were at their highest in one year, a Reuters poll of 13 respondents showed.
The yuan is one of the worst performing Asian currencies so far in 2019, with markets turning increasingly bearish ever since Chinese authorities allowed the tightly managed unit to breach the key 7-per-dollar level earlier this month, feeding fears of a currency war.
Last week, U.S. President Donald Trump lashed back at a new round of Chinese tariffs by slapping an additional 5% duty on some $550 billion worth of Chinese goods in the latest salvo in the protracted trade dispute.
"Policymakers have been allowing the currency (yuan) to depreciate to reflect numerous negative growth fundamentals, one of which is tariffs," Societe Generale analysts wrote in a note.
"This should continue to be the case going forward unless capital outflow pressure intensified or speculative positioning became excessive."
Investors' view of the Indian rupee also worsened, with short positions rising to the highest since November 2018.
Policymakers in the South Asian nation are worried about weak growth and could cut interest rates further to prop up the economy, according to minutes from the central bank's August meeting.
Bearish bets on the South Korean won were at a more than three-month high and those on the Taiwan dollar were at a two-month peak.
Meanwhile, investors increased long positions on the Thai baht, a bastion of strength in Asia.
Thailand's exports unexpectedly rose in July for the first time in five months, helped by a surge in gold shipments, the commerce ministry said last week.
However, the central bank warned on Monday that the outlook for the baht, Asia's best performing currency this year, could be clouded by the intensifying trade tensions.
The Reuters survey is focused on what analysts 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 included positions held through non-deliverable forwards (NDFs).