Most notably, investors turned bearish on the currencies of South Korea, Singapore and Taiwan, and trimmed their long bets on China's yuan and the Philippine peso, according to a fortnightly poll of 12 respondents.
Taiwan and Singapore, hailed for their success in containing previous COVID-19 outbreaks, have recently seen a spike in cases, prompting social curbs and a race to ramp up vaccinations.
Rising infections last week forced Malaysia into a nationwide lockdown until June 7 and also led Thailand to downgrade its 2021 economic growth forecast on Monday.
"COVID-19 is probably the dominant risk for EM/Asia for now," analysts at DBS bank wrote, noting worsening daily infection trends across the region.
"Without a high enough proportion of the population vaccinated, there will also always be risks of another COVID wave, even if containment measures were deemed strong."
Short bets on South Korea's won, the Taiwanese dollar, Malaysia's ringgit, and the Thai baht were at their highest since April 8, while investors were the most bearish on Singapore's dollar since March 25.
They, however, turned bullish on the Indian rupee for the first time in more than two months. The currency has firmed slightly since March-end despite a crippling second wave of infections and record deaths.
"Near-term rupee stability ... is not a paradoxical de-coupling with COVID devastation. This is merely a tactical bet on distribution of resources, policy support and recovery hopes," Mizuho analysts said in a note.
Markets turned cautiously bullish on the Indonesian rupiah for the first time since late February.
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 Shashwat Awasthi and Arundhati Dutta in Bengaluru; Editing by Subhranshu Sahu)
By Shashwat Awasthi