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US Dollar, ASEAN Fundamental Outlook: SGD, IDR, MYR and PHP

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

  • US Dollar cautiously weakened against ASEAN FX last week
  • USD/SGD, USD/IDR, USD/MYR and USD/PHP eyeing stocks
  • Earnings season, US GDP and the Federal Reserve in focus

US Dollar ASEAN Weekly Recap

The US Dollar was on average a little lower versus ASEAN currencies such as the Indonesian Rupiah, Malaysian Ringgit and Philippine Peso last week – see chart below. Volatility was subdued as aggressive upside momentum on Wall Street ebbed. After a rough start to the week as crude oil prices temporarily turned negative, the Dow Jones declined -1.93% over the past 5 trading days. Equities trimmed losses on Friday.

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Last Week’s US Dollar Performance

US Dollar, ASEAN Fundamental Outlook: SGD, IDR, MYR and PHP

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

ASEAN FX Versus Risk Trends

As I mentioned in last week’s ASEAN fundamental outlook, the focus for pairs such as USD/SGD, USD/IDR, USD/MYR and USD/PHP by and large remain on development in global market sentiment. This may have been why the Singapore Dollar struggled to achieve notable gains after local industrial production surged 16.5% y/y in March versus -4.9% anticipated. That was the sharpest reinvigoration since January 2018.

The correlation between my ASEAN-based US Dollar index and the MSCI Emerging Markets Index (EEM) remains inverse at -0.55 at the time of writing – see next chart below. Values closer to -1 indicate a stronger inverse relationship and vice versa, though correlation does not imply causation. As such, the impact of key event risk next week on equities will likely translate into ASEAN FX.

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US Earnings Season, GDP and the Fed

All eyes remain on the US earnings season to gauge how companies in the world’s largest economy are faring. Investors often look to the country for a picture of where the global growth could be heading. Thus far financial firms have been notably missing expectations while those in information technology and consumer discretionary are faring relatively better.

Tech businesses due to report this week include Amazon, Facebook, Microsoft and Alphabet. If they continue to follow the somewhat upbeat tone, then perhaps sentiment can get bolstered in the near term and bode ill for the USD. But the medium term picture is less certain as it arguably hinges on the speed of countries reopening businesses and easing social distancing laws. This will likely be accompanied by the risk of a resurface in coronavirus case growth.

Data out of the US continues to notably disappoint relative to economists’ expectations, opening the door to further dismal surprises. Local GDP is expected to contract for the first time in six years, but the extent of which is yet to be seen. Markets will also be watching the Federal Reserve on Wednesday. Rates are already at zero with quantitative easing running in the background. As such, the focus will likely be on their economic assessment.

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

US Dollar, ASEAN Fundamental Outlook: SGD, IDR, MYR and PHP

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

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