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ASEAN Weekly Outlook – Crude Oil, Fed, Singapore Dollar, Malaysian Ringgit, US Dollar

  • Fading 2019 Fed rate hike bets sunk the US Dollar, boosting ASEAN FX. Lower oil helped PHP
  • Singapore Dollar may be at risk to disappointing GDP and CPI data while MYR may rise ahead
  • Weaker crude oil prices may keep benefiting PHP, but a US Dollar rally on the horizon is a risk

Check out our 4Q forecasts for the US Dollar in the DailyFX Trading Guides page

The US Dollar took a hit last week which allowed most ASEAN bloc currencies to appreciate. Weakness in the greenback occurred with fading 2019 Fed rate hike bets. Looking at Fed funds futures shows that the markets are now pricing in less than two rate hikes next year. This was as a result of key members, including Chair Jerome Powell, acknowledging that weakening global growth has to be factored in their outlooks.

USD/PHP was a strong performer as well as USD/IDR which both had the pleasure of being support by rate hikes from their associated central banks. On top of that, the Philippine Peso benefited from falling oil prices. This puts downward pressures on inflation in a country where CPI is above the central bank’s target. Not to mention this also helps to alleviate some knock-on pressures from the US China trade war on emerging markets.

USD/SGD, USD/IDR, USD/MYR, USD/PHP 5-Day Performance

The week ahead contains a couple of notable Singaporean economic data. First we will get the finalized reading on the nation’s third quarter GDP. Growth is expected to slow down from 3.9% in the second quarter to 2.4% which would follow the trend of ebbing global economic expansion. This is then followed by local CPI data on Friday.

The Monetary Authority of Singapore (MAS) offered a more hawkish approach to its currency band back in October in anticipation of upward pressures to core inflation. But, it remained positive on economic growth. Should these notable pieces of data from Singapore disappoint this week, we may see declines in the Singapore Dollar as MAS policy approach estimates are undermined.

Meanwhile the Malaysian Ringgit looks to October’s CPI report. Prices are anticipated to pickup from 0.3% y/y in September to 0.5% in October. Keep in mind that the central bank of Malaysia expects deflation in the coming months so outcomes that are rosier than their outlook may inspire gains in the Malaysian Ringgit. Technically speaking, USD/MYR seems vulnerable to a reversal lower.

Externally speaking, certain ASEAN economies that rely more on importing crude oil, such as the Philippines, may keep getting relief from lower prices ahead. Despite speculation that OPEC might be aiming for output cuts ahead, Russia looks like it won’t be partaking in coordinated efforts. As a key global oil producer, Russia standing aside could undermine efforts from the cartel to increase prices.

In the more medium-term, weakness in the US Dollar may be temporary. The Fed’s own projections are aiming for perhaps three hikes in 2019. This means that unless that path is altered, the markets will have to catch up with reality and that should send the US Dollar higher. Whether this occurs in the week ahead remains to be seen, but it shouldn’t be discounted. For now, ASEAN FX may face some illiquidity given the upcoming US Thanksgiving holiday.

Read our ASEAN Technical Outlook to see what moves USD/MYR, USD/PHP, USD/IDR and USD/SGD could also make next!

FX Trading Resources

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

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