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US Dollar Fundamental Outlook: USD/SGD, USD/IDR, USD/MYR, USD/PHP

US Dollar Fundamental Outlook: USD/SGD, USD/IDR, USD/MYR, USD/PHP

Daniel Dubrovsky, Contributing Senior Strategist


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

  • US Dollar sank against its ASEAN counterparts last week
  • Blowout NFPs reinforced economic recovery expectations
  • Capital flowing back into Emerging Markets, eyes on Fed
  • Absent shock, SGD, IDR, MYR and PHP may keep rising

US Dollar ASEAN Weekly Recap

The haven-linked US Dollar sank this past week against its ASEAN counterparts such as the Singapore Dollar, Indonesian Rupiah, Malaysian Ringgit and Philippine Peso. As expected, the focus for the Greenback versus Southeast Asia currencies remained on external factors driving risk appetite. This will also likely be the case in the week ahead. If sentiment continues improving, USD could continue depreciating.

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The biggest headline last week was arguably the blowout US jobs report on Friday. The world’s largest economy added 2.5 million positions, exceptionally overshooting even the least-dismal projection from economists. What this did is reinforce rising expectations of a robust recovery in growth after coronavirus lockdown measures effectively shut down countries across the world. The S&P 500 rose 4.91% last week.

Broad optimism from investors likely meant that regional ASEAN data was brushed aside. That is why perhaps the Singapore Dollar looked past local retail sales contracting -40.5% y/y in April, worse than -34.9% anticipated. The Philippine Peso also didn’t pay much attention to the local unemployment rate surging to a record-high 17.7%. The Indonesian Rupiah gained over 5% the past 5 trading days.

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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 – Capital Flows, Fed, US-China Tensions

The rise in risk appetite as investors feel more inclined to pursue higher returns and yields mean that capital is slowly flowing back into Emerging Markets. A proxy of those flows tracked by Bloomberg shows the index at its highest since early March. On the next chart below, you can see the close inverse relationship between my ASEAN-based US Dollar index and with the MSCI Emerging Markets Index (EEM).

Absent a shock, more capital inflows to developing economies will likely continue boosting SGD, IDR, MYR and PHP against the Greenback. All eyes next week turn to the Federal Reserve on Wednesday. Benchmark lending rates are expected to be left unchanged near zero. Speculation has been rising that the central bank could turn to deploying yield curve control as it prepares to launch the Main Street Lending Program (MSLP).

The latter is designed to help businesses with less than 15k employees. It would open the door for the Fed to purchase a significant portion of loans from these companies owned by banks. Investors will also be awaiting further commentary on economic conditions. Meanwhile in the background, weekly growth in the balance sheet is slowing as the central bank slowed the daily pace of Treasury purchases to US$4 billion per day.

Downside risks remain for market sentiment. Tensions between the US and China could yet heat up. President Donald Trump threatened tariffs against the latter over levies on lobsters. Domestic unrest as riots and protests swept the nation over the killing of George Floyd could raise the risk of a second coronavirus wave. Across the Atlantic Ocean, Brexit talks may fail to bear fruit as the possibility of extending the transition period is decided.

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ASEAN Event Risk – China Aggregate Financing

Focusing on regional event risk, aggregate financing data from China is due at an unspecified time. It could even cross the wires early next week. New financing is expected to rise by 3.5 trillion Yuan in May, up from 3.1 trillion prior. The extra support is likely to continue fueling the economic recovery. For many ASEAN nations, China is a key trading partner and growth in the latter can spill over abroad.

Last week, Malaysia unveiled a 35 billion Ringgit short-term economic recovery plan. Meanwhile in the Philippines, the House of Representatives approved a US$26 billion stimulus package. That may also support the Philippine Peso should sentiment continue improving. Local Economic Planning Secretary Karl Chua said that a gradual recovery is expected in the coming quarters.

Despite recent gains in the Rupiah, the Bank of Indonesia still views its currency as undervalued. The central bank could take aggressive efforts to stem depreciation in IDR should risk appetite noticeably wane in the week ahead. If you are interested in my ASEAN technical outlook, check out my latest update here.

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.