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US Dollar May Rise on Trade War Woes: SGD, PHP, MYR, IDR at Risk

US Dollar May Rise on Trade War Woes: SGD, PHP, MYR, IDR at Risk

Daniel Dubrovsky, Contributing Senior Strategist
What's on this page

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

  • The US Dollar weakened against ASEAN FX for most of last week
  • US-China trade war fears may resurface, boosting the Greenback
  • What else ahead for USD/SGD, USD/PHP, USD/MYR, USD/IDR?

US Dollar ASEAN Weekly Recap

The US Dollar generally underperformed against ASEAN currencies last week such as the Singapore Dollar, Philippine Peso, Malaysian Ringgit and Indonesian Rupiah. As mentioned in the previous fundamental outlook, the focus for ASEAN FX generally remained on risk trends and external developments. The SGD, IDR, MYR and PHP rose as sentiment improved during the front end of last week.

Global stock markets did however turn notably lower into the end of last week as sentiment deteriorated. The Labor Day holiday on Friday in certain Southeast Asia nations meant that the pessimistic shift in investors did not yet transpire into ASEAN FX fully. As such, pairs such as USD/SGD and USD/MYR may find some upside momentum as the week gets rolling as regional markets catch up to the latest developments.

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Last Week’s US Dollar Performance

Last Week's US Dollar Performance

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

External Event Risk – US-China Trade War Fears? Non-Farm Payrolls

What helped push equities lower last week may have been a resurface in US-China trade war fears. President Donald Trump made it clear that he was unhappy with how China handled the outbreak of the coronavirus. He threatened potentially using tariffs as a response. As a reminder, the trade spat between the world’s largest economies took its toll on global growth, manufacturing and business confidence prior to the virus.

A deal between the two largest powerhouses helped cool those woes, but a resurface in tensions could risk amplifying what has been the economic consequences of global lockdown measures. That would further dash hopes of a “V-shaped” recovery in nations, potentially extending durations of what is anticipated to be an inevitable recession. In such a case, the haven-linked US Dollar could start seeing more demand.

On the next chart below is my ASEAN-based US Dollar Index overlaid with the MSCI Emerging Markets Index (EEM). The former is an average of USD/SGD, USD/IDR, USD/MYR and USD/PHP. There does appear to be a lasting inverse relationship between the two. With that in mind, the broad focus for these pairs will thus likely continue to be on external factors that can shift sentiment.

All eyes next week are on the April US non-farm payrolls report. The country is expected to lose over 21 million jobs, the most since records started being kept in the late 1930s. This is as unemployment could shoot higher to 16% from 4.4%. A worse-than-expected outcome could remind investors of the serious damages the virus has had on the economy, slowly dashing hopes of a quick recovery and risk fueling losses on Wall Street.

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

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

Chart Created Using TradingView

ASEAN Event Risk – Central Bank of Malaysia, Indonesian and Philippine GDP, China Trade

The ASEAN economic docket is fairly busy, and you can now see most of these updates on the newly-enhanced DailyFX economic calendar. Some top-tier events include the Bank of Malaysia on Tuesday. The central bank is expected to slash benchmark lending rates to 2.00% from 2.50%, the lowest since 2010. Since this is mostly priced in, USD/MYR may focus more on the central bank’s forward guidance and external news.

First-quarter Indonesian GDP will also cross the wires on the same day with growth anticipated to slow to 4.11% y/y. That would be the slowest pace of expansion since 2005 and a softer-than-expected result may rekindle upside pressure in USD/IDR. However, if broad market sentiment holds up and equities generally continue rising next week, IDR losses could be made mute down the road.

On Thursday, Philippine first-quarter GDP is also due and growth is anticipated to slow to 3.0% y/y from 6.4%. That would be the weakest pace of expansion since 2009. Chinese trade data is also due on the same day, with exports anticipated to shrink -9.5% y/y in April. Despite lockdown easing measures, China found itself opening up to a global economy that was in the process of shutting down, limiting its rebound potential.

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-- Written by Daniel Dubrovsky, Currency Analyst for

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.