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

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

  • US Dollar fell vs ASEAN FX as overall market sentiment improved
  • Traders may have also put less weight on surge in Chinese equities
  • Key risks: earnings season, US retail sales, China & Singapore GDP

US Dollar ASEAN Weekly Recap

The anti-risk US Dollar traded lower against its ASEAN counterparts last week such as the Singapore Dollar, Malaysian Ringgit, Indonesian Rupiah and Philippine Peso. This is market mood cautiously improved globally and around the Asia Pacific region. The latter was particularly bolstered as China cheerlead local stock markets.

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The Singapore Dollar traded flat following a general election, as expected. The ruling People’s Action Party (PAP) maintained their grip, opening the door for the status quo in terms of policy approach. In the Southeast Asia region, the Indian Rupee experienced its worst week in 3 months – see chart below.

Local 10-year government bond yields continued declining. This perhaps spoke to more investors betting on further economic support from the Reserve Bank of India (RBI). India is the third-largest impacted nation by overall confirmed coronavirus cases.

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Last Week’s US Dollar Performance

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

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

External Event Risk – Earnings Seasons, US Retail Sales and Consumer Confidence

On the next chart below, my ASEAN-based US Dollar index continues to inversely follow the MSCI Emerging Markets Index (EEM). As such, the trajectory for USD against ASEAN FX will likely continue being influenced by market sentiment. Although it should be noted that while the EEM set higher highs recently, an identical index that leaves out China did not. About 42% of the EEM is exposed to Chinese assets.

Perhaps a reason why the USD did not materially depreciate further against ASEAN FX is a lack in confidence of the properties that caused Chinese shares to rally as of late. The EEM rallied over 8.2% these past two weeks, while the one excluding China rose roughly half as much. A large portion of gains in the former were arguably triggered when state-run Securities Journal underscored the importance of fostering a bull market.

With that in mind, perhaps investors are hesitant to commit further capital into currencies like the Singapore Dollar and Malaysian Ringgit until more insight is known into the state of global growth. This week, relatively elevated US stock valuations will begin to be tested as second-quarter earnings season gets underway with major financial companies like JPMorgan and Wells Fargo reporting.

On the whole, economic data out of the world’s largest economy continues to outperform relative to expectations. This may open the door to rosy retail sales and consumer confidence. But at the same time, these could be overshadowed by rising coronavirus cases that may increase the likelihood states and counties take bolder actions to reimpose lockdowns. Risk aversion would likely bolster the US Dollar.

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ASEAN Event Risk – China and Singapore GDP, Trade Data: China, Indonesia, India

All eyes at the end of the week turn to the world’s second-largest economy, China. After a -6.8% y/y contraction in GDP, growth is expected to clock in at 2.2%. A sharp rebound would likely underscore expectations of a swift V-shaped recovery. This could also imply positive knock-on spillovers for the neighboring ASEAN region.

Singapore will also be releasing GDP for the same time frame, but earlier in the week on Tuesday. The island city-state’s economy is anticipated to shrink -11.3% y/y, down from -0.7% prior in Q1. While this may be a source of near-term volatility for USD/SGD, the path forward will likely depend on risk trends. Chinese trade data is due on the same day, with Indonesia and India releasing theirs on Wednesday.

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 (EEM) stood at -0.55. 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 – Daily Chart

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