US Dollar Fundamental Outlook: USD/SGD, USD/IDR, USD/MYR, USD/PHP

US Dollar, Singapore Dollar, Indonesian Rupiah, Malaysian Ringgit, Philippine Peso – Talking Points

  • US Dollar drop continued against ASEAN currencies
  • ASEAN external risk: US fiscal stimulus and jobs data
  • ASEAN and South Asia risk: GDP, RBI rate decision

US Dollar ASEAN Weekly Recap

The haven-linked US Dollar extended losses against its ASEAN counterparts last week, with the Singapore Dollar, Malaysian Ringgit and Philippine Peso seeing some of the best performance. The Indonesian Rupiah was close to little changed as well as the Indian Rupee – see chart below.

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Market sentiment spent most of the past 5 trading sessions broadly improving, and this is what ASEAN FX paid most attention to – as expected. All eyes were on the Federal Reserve as the central bank left interest rates at near-zero levels as Chair Jerome Powell hinted for the need in a prolongment of accommodative policy measures. The Fed highlighted that this is due to the considerable risks the coronavirus poses.

All eyes were also on key tech earnings last week as Facebook, Amazon, Apple and Google smashed expectations, pushing the Nasdaq 100 higher. In Malaysia, the nation reported a larger-than-expected trade surplus. The markets have also been shrugging off rising US-China tensions. Ebbing stock market volatility and accommodative central bank policy around the world have been depressing the US Dollar

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Last Week’s US Dollar Performance

US Dollar Fundamental Outlook: USD/SGD, USD/IDR, USD/MYR, USD/PHP

*ASEAN-Based US Dollar Index averages USD/SGD, USD/IDR, USD/MYR and USD/PHP

External Event Risk – US Fiscal Stimulus, Non-Farm Payrolls Report, Lockdowns?

External event risk for ASEAN currencies somewhat fades this week, but USD/SGD, USD/IDR, USD/MYR and USD/PHP will likely remain sensitive to market mood. The US Congress ended last week without an agreement on the next fiscal package as the $600 extra unemployment benefit per week expired. But hopes remain high for a deal, a delay would risk sparking a selloff in stocks and boost the USD.

Markets continue to shrug off the surge in US coronavirus cases and what has recently been a spike in fatalities as well. It may be due to the measures taken thus far to contain the spread as inadequate to materially throw off the outlook for future GDP. Harsher lockdowns remain an upside potential for the US Dollar in the event it stokes demand for preserving capital and liquidity.

All eyes at the end of the week turn to the US jobs report for further information into the health of the labor market. Data continues to outperform relative to economists’ expectations as of late. A rosy jobs report, combined with an ultra-loose Fed, may boost equities further. That may propel the SGD, MYR, IDR and PHP higher on average towards the end of the week.

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ASEAN, South Asia Event Risk – Indonesia and Philippine GDP, Reserve Bank of India Also Due

The ASEAN and neighboring economic calendar docket is fairly busy though as more will be revealed about the damage Covid-19 has done. On Wednesday, Indonesia GDP may contract about -5% y/y in the second quarter, a historical amount. Then on Thursday Philippine GDP could shrink about -9% over the same period. Aside from a material miss in expectations, IDR and PHP may look past these as markets are forward looking.

Investors may already be pricing in these outcomes, looking forward to the anticipated economic recovery ahead. More timely data include Philippine trade data as well as Singapore retail sales. China, a key trading partner for the ASEAN group, will release Caixin composite PMI data on Wednesday followed by the latest trade balance figures on Friday at an unspecified time.

In another part of the Asia Pacific region, the Reserve Bank of India will have its interest rate decision on Thursday. The central bank may reduce its benchmark repo rate to 3.75% from 4.00%. However, expectations for a 25-basis point cut are fairly split. This is a key ingredient for potential volatility in the Indian Rupee depending on what side investors find themselves. Follow me on Twitter for updates in USD/INR.

At the end of last week, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and the MSCI Emerging Markets Index, excluding China, (EMXC) stood at -0.89. Values closer to -1 indicate an increasingly inverse relationship, though it is important to recognize that correlation does not imply causation.

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ASEAN-Based USD Index Versus MSCI Emerging Markets Index (Ex China) – Daily Chart

US Dollar Fundamental Outlook: USD/SGD, USD/IDR, USD/MYR, USD/PHP

Chart Created Using TradingView

*ASEAN-Based US Dollar Index averages USD/SGD, USD/IDR, USD/MYR and USD/PHP

— Written by Daniel Dubrovsky, Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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