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ASEAN Outlook Talking Points:

  • USD may gain versus PHP, SGD if US advances on more Chinese tariff threats
  • MYR may brush off expected disinflation, IDR looks to an interest rate decision
  • Will US pursue auto import tariffs? Lawmakers to question Fed Chair Powell

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ASEAN bloc currencies such as the Philippine Peso and Malaysian Ringgit face another week that could bring with it more on the developments of the global trading environment. In the previous week, US President Donald Trump refreshed additional threats of $200b in Chinese import tariffs which sent global stock markets tumbling while the US Dollar rose.

Since then, those fears have died down as reports crossed the wires that the two countries could be open to more negotiations in the meantime. However, the risk that things don’t go as planned still remains and could come back to hurt PHP, MYR, SGD and IDR. In addition, next week we shall see if the world’s largest economy sees auto imports as a national threat, paving the way for more tariffs that could disrupt markets.

Bringing things locally, there are a couple of economic event risks ahead starting with Malaysian CPI on Wednesday. Headline inflation is expected to clock in at 1.2% y/y in June from 1.8%. While this could inspire Bank of Malaysia easing bets, the slowdown in prices is expected. At last week’s interest rate announcement, the BNM expects CPI to be lower ahead while core measures remain relatively stable.

Thus, the Malaysian Ringgit could potentially brush off some disinflation. Beyond that lies Bank of Indonesia’s interest rate announcement at an unspecified time on Thursday. Economists are anticipating a rate hold at 5.25%. Lately, the central bank sees IDR as ‘undervalued’ compared to USD. It has also been intervening in the FX market to stabilize its currency. Signs that it is eager to take more measures or hike again soon may boost the Indonesian Rupiah.

These currencies could be at risk if the US Dollar continues rallying on safe haven bids. For the greenback, locally speaking it faces a couple of appearances from Fed’s Chair Jerome Powell this week as he takes questions from lawmakers about the state of the US economy. Last week, Mr. Powell noted that sustained high tariffs could be negative for the economy. It seems as though he will inevitably be asked for more detail in regards to this.

We recently released our 3Q forecasts for currencies like the US Dollar in the DailyFX Trading Guides page

USD/IDR and other ASEAN Currencies Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

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