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

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

  • The US Dollar traded mixed against ASEAN currencies last week
  • Wall Street gained as US-China trade war fears appeared to cool
  • All eyes on Fed balance sheet, Fed speak and gradual reopening

US Dollar ASEAN Weekly Recap

The US Dollar had a mixed week against ASEAN currencies such as the Malaysian Ringgit, Singapore Dollar, Philippine Peso and Indonesian Rupiah. As anticipated, the broader picture for my ASEAN-based US Dollar index continued to focus on developments in sentiment. To that end, a rough start to the week finished on an upbeat tone as US-China trade war worries seemed to cool for the time being. Stocks on Wall Street gained.

The focus for USD/IDR and USD/PHP on market mood was underscored after Indonesian and Philippine GDP data crossed the wires respectively. In the first quarter, Indonesian growth slowed to 2.97% y/y versus 4.00% expected. That was the worst outcome since 2001. Philippine GDP in the same period contracted -0.2%, the most since at least 1999.

That IDR and PHP were still able to still finish on a cautiously stronger note against the US Dollar despite dismal data likely paints a similar trajectory for the road ahead. That is, ASEAN FX may generally pay closer attention to external developments instead of local. The exception last week was the Malaysian Ringgit. USD/MYR rose as the Bank of Malaysia cuts rates by 50-basis points to 2.00%, hinting at more measures.

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Last Week’s US Dollar Performance

US Dollar Fundamental Forecast: 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 – Fed Balance Sheet, Coronavirus Cases and Gradual Easing in Lockdowns

On the chart below is an ASEAN-based US Dollar index – averaging USD/SGD, USD/IDR, USD/PHP and USD/MYR – overlaid with the MSCI Emerging Markets Index (EEM). The 20-day rolling correlation coefficient stands at -0.7. Values close to -1 indicate an inverse dynamic and vice versa. It should be noted that correlation does not imply causation.

Having said that, there are some key fundamental developments to keep an eye out. The first is the slowdown in coronavirus cases globally which is pushing more countries to slowly ease lockdown restrictions. This may be why equities seem to be looking past dismal economic data and rather focusing on the future. Last week, the worlds’ largest economy lost over 20.5 million non-farm payrolls as unemployment soared to 14.7%.

In the background though, the aggressive pace in monetary stimulus to support growth seems to be fading. The Federal Reserve’s balance sheet has swelled to over US$6.7 trillion last week. While this is impressive, that represents a +0.98% change from the prior period. On Friday, the Fed also slowed its daily Treasury purchases to US$7 billion from $8b prior.

What this means is that sentiment – absent a significant uptake in liquidity – may need increasingly stronger conviction to sustain bullish momentum. The slope of appreciation in my Wall Street index has been fading. Commentary from Fed officials – such as James Bullard and Patrick Harker ahead – may spook investors in a similar way the central bank’s Vice Chair did when he warned about the pace of a recovery in jobs.

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ASEAN Event Risk – Malaysian GDP, Chinese Industrial Production and Retail Sales

It should be noted that Malaysian GDP is expected to shrink -0.6% y/y in the first quarter next week. But as mentioned earlier, USD/MYR may focus on external developments. A rosy session in equities ahead could offset weakness in the Ringgit as a result of the economic data. What may boost sentiment is if Chinese industrial production and retail sales on Friday beats expectations.

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ASEAN-Based USD Index Versus MSCI Emerging Markets Index – Daily Chart

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

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Currency Analyst for

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

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