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US Dollar May Rise as SGD Falls on US-China Woes, Indian Rupee at Risk

US Dollar May Rise as SGD Falls on US-China Woes, Indian Rupee at Risk

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

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

  • US Dollar traded flat against ASEAN currencies last week
  • Bank of Indonesia intervened to support the Rupiah again
  • US-China tensions risk complicating an economic recovery
  • Indian Rupee is vulnerable, 1Q GDP may dramatically slow

US Dollar ASEAN Weekly Recap

The US Dollar experienced a broadly neutral week against its ASEAN counterparts such as the Singapore Dollar, Philippine Peso and Malaysian Ringgit. As anticipated, ASEAN currencies spent most of their time following investors’ risk appetite. Optimism for a coronavirus vaccine from Moderna earlier in the week was then overshadowed as China introduced more stringent control over Hong Kong, sinking the local Hang Seng Index stocks benchmark.

A notable standout was the Indonesian Rupiah, which managed to gain about 1 percent against the US Dollar. The Bank of Indonesia unexpectedly left rates unchanged as it reiterated the need for market intervention to defend its currency. The latter has been a key sticking point as of late, likely boosting IDR as expected. USD/IDR was also absent from trading towards the end of the week due to local market holidays.

Indian Rupee and the RBI Emergency Rate Cut

Meanwhile, USD/INR rose after the Reserve Bank of India (RBI) unexpectedly slashed benchmark lending rates at an unscheduled meeting on Friday. Local government bond yields tumbled as the repo rate was cut by 40 basis points to 4.00%. The central bank also extended a moratorium on bank loans for an additional 3 months to help provide relief for businesses amid the coronavirus outbreak as credit spreads widen.

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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 Tensions, Consumer Confidence

USD/SGD, USD/IDR, USD/MYR and USD/PHP may continue focusing on market sentiment in the week ahead. On the next chart below, you can see the inverse relationship between my ASEAN-based US Dollar index and the MSCI Emerging Markets Index (EEM). While the 20-day rolling correlation has been becoming less inversed, US-China tension woes may reinvigorate this relationship.

The Greenback saw steady appreciation when the US-China trade war picked up pace not long ago. If tensions escalate further and perhaps lead to additional tariffs or other barriers, this may complicate the economic recovery from the coronavirus. That may further cool expectations of a robust rebound in GDP as another 2 million Americans are anticipated to have filed for unemployment claims last week.

In the background, expansion in the Federal Reserve’s balance sheet has been noticeably slowing as of late. That could be making it increasingly difficult for equities to find further upside momentum in these uncertain times. Conference Board and University of Michigan sentiment data will cross the wires in the week ahead. Gauges of confidence in a consumer-oriented economy will be critical to watch for the trajectory of sentiment.

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ASEAN Event Risk – Singapore and Indian GDP

Focusing on Southeast Asia economic event risk, GDP data from Singapore and India will cross the wires on Tuesday and Friday respectively. The former will be a finalized revision which may show that the first-quarter contraction may have been less aggressive at -8.2% q/q versus -10.6% estimated.

Indian growth meanwhile is anticipated to drop down to +1.0% y/y in the first quarter from +4.7% prior. This could be a historical print as the RBI envisions fiscal-year 2021 economic growth to turn negative. The Rupee is looking vulnerable here, especially considering that India already faced the threat of stagflation prior to the virus outbreak.

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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

-- 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.