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US Dollar Outlook Eyes Virus Spikes: USD/SGD, USD/IDR, USD/PHP, USD/MYR

US Dollar Outlook Eyes Virus Spikes: USD/SGD, USD/IDR, USD/PHP, USD/MYR

Daniel Dubrovsky, Contributing Senior Strategist


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

  • US Dollar cautiously rose last week versus ASEAN FX
  • Rising virus cases could risk deteriorating market mood
  • Will rosy US data offset those woes? IMF outlook eyed
  • Asia Pacific event risk: Philippine Central Bank ahead

US Dollar ASEAN Weekly Recap

The haven-linked US Dollar gained cautious ground against some of its ASEAN counterparts like the Indonesian Rupiah and Singapore Dollar last week. As mentioned previously, the USD’s focus against certain currencies from developing nations fundamentally remains on risk appetite. The S&P 500 and Dow Jones wobbled on Friday, boosting the US Dollar. For the time being, a sharp revival in volatility was avoided.

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Some of the jitters from investors could have been traced to rising cases of the coronavirus across the world. In China’s capital, officials stepped in to contain an outbreak in Beijing. This is as US states like California, Arizona, Florida and Texas saw record daily spikes in confirmed Covid-19 reports. In South America, Brazil topped one million cases as fatalities from the disease climbed to just shy of 49k.

The Indonesian Rupiah lost the most ground as the country also saw a record spike in Covid-19 reports. Though the central bank may step in to mitigate deeper IDR selling pressure in the future. This is as the Philippine Peso was the most resilient, gradually gaining throughout the week – see chart below. In other parts of Southeast Asia, the Indian Rupee tumbled as China-India border tensions flared up.

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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 – Second Coronavirus Wave, US Data, IMF 2020 Growth Outlook Update

With cases of Covid-19 spiking in parts of the world, the question may soon turn to whether or not local government officials may reinstate lockdown measures absent a vaccine. That would almost certainly prolong what the World Bank is envisioning as the largest contraction in global growth since World War 2. That may fuel risk aversion, pushing the US Dollar higher on average versus SGD, MYR, IDR and PHP.

Some good news may continue flowing out of the world’s largest economy. Data there has been tending to increasingly outperform relative to economists’ expectations as of late. This was seen most recently with retail sales data for May which rose 17.7% m/m. The week ahead contains local Markit PMIs (manufacturing & services), durable goods orders, personal spending and University of Michigan Sentiment.

More of the same may propel equities higher, sending USD/SGD, USD/MYR, USD/IDR and USD/PHP lower on average. In fact, the importance of economic data for stocks is underscored by what was the largest weekly decline in the Fed’s balance sheet this year. The latter may leave investors seeking for more liquidity. A source of fear could come from the latest assessment for 2020 growth from the International Monetary Fund (IMF).

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ASEAN Event Risk – Philippine Central Bank, CPI and Industrial Production Data

Focusing on the APAC region, Malaysia and the Philippines will be updating their foreign exchange reserve holdings. When capital outflows rise, especially during times of market panic, investors can heavily scrutinize these figures. Singapore and Malaysia will report the latest round of CPI data. The focus for USD/SGD, USD/MYR and USD/PHP may however remain on the MSCI Emerging Markets Index – see chart below.

On Thursday, PHP eyes the Philippine Central Bank (BSP). Economists are evenly split on the probability the BSP could reduce the overnight borrowing rate from 2.75%. That would leave about half of investors on the wrong end of the outcome, a potential driver for PHP volatility. While the BSP mentioned that it is participating in FX markets, the central bank recently stated it is ‘not bothered’ with where the Peso is.

Singapore will wrap up the week with industrial production data on Friday. Rather than being a key source of volatility for USD/SGD, traders may watch the data for further insight into the health of the global economy. Afterall, trade-reliant island city-state can be quite vulnerable to external forces. For more insights into ASEAN FX, check out my latest technical forecast for USD/SGD, USD/IDR, USD/MYR and USD/PHP.

At the end of last week, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and the MSCI Emerging Markets Index (EEM) stood at -0.94. Values closer to -1 indicate an increasingly inverse relationship, though it is important to recognize that correlation does not imply causation.

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

-- 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.