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US Dollar Forecast: Stimulus Delay, New Virus Strain, Brexit Threaten SGD and THB

US Dollar Forecast: Stimulus Delay, New Virus Strain, Brexit Threaten SGD and THB

Daniel Dubrovsky, Contributing Senior Strategist


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US Dollar, Singapore Dollar, Indonesian Rupiah, Philippine Peso, Thai Baht, ASEAN – Talking Points

  • The US Dollar may find a bottom against ASEAN currencies on market volatility
  • Year-end external risks: US stimulus woes, coronavirus mutation, no-deal Brexit
  • APAC, ASEAN data: Bank of Thailand, Singapore industrial output, China PMI

US Dollar ASEAN Weekly Recap

Last week, the haven-linked US Dollar mostly lost ground to currencies from the ASEAN region such as the Singapore Dollar, Malaysian Ringgit and Thai Baht. Meanwhile, the Philippine Peso was little changed while the Indonesian Rupiah cautiously weakened. This followed rate decisions from the Philippine and Indonesian central banks, where benchmark borrowing costs were left unchanged – as expected. Broadly speaking, currencies from the developing Asia-Pacific region remain sensitive to risk appetite and there are key external developments to watch out for heading into the end of this year.

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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 Covid Relief Woes, Coronavirus Mutation, ‘No-Deal’ Brexit

All eyes are on the United States, where there remain hurdles to a Covid relief fiscal package. Despite Congress passing a US$900 billion bill at the beginning of the week, which includes $600 stimulus checks and enhanced weekly unemployment benefits of $300, President Donald Trump has thrown a curveball. During morning Wednesday APAC trade, Trump asked the legislative branch to amend the package.

He called to raise stimulus checks to $2000 as well as to remove certain elements in the package. While not threatening a veto, one which will likely be overturned by the Senate when it meets again on December 29th, he could not sign the bill at all, resulting in a ‘pocket veto’. That would risk suspending benefits of the original aid package when they expire at year-end, including federal protections against evictions. The government would also shut down on December 29th as funding was attached to the bipartisan relief package.

In response, Democrats in the House of Representatives are expected to bring forward a separate bill that will boost the checks to $2,000. Futures tracking Wall Street equities declined on these developments, which add elements of uncertainty and threaten a delay to the Covid relief package. This follows diminishing local consumer confidence readings heading into year-end holidays.

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Meanwhile, a new coronavirus strain brewing in the United Kingdom and South Africa could result in harsher lockdowns if it spreads elsewhere. While still being analyzed, preliminary data is showing that the mutation is about 70% more transmissible. Brexit also remains a threat to risk appetite with bets of a ‘no-deal’ rising as the EU and UK struggle to come to terms with fisheries and a level playing field.

With that in mind, a deterioration in market mood into 2021 could offer a floor to persistent weakness in the US Dollar across the ASEAN realm. Pairs like USD/SGD, USD/THB, USD/IDR and USD/PHP could see a push higher if market volatility strikes as liquidity drains around the Christmas holiday. In fact, recent stock market jitters in the US and abroad have resulted in cautious gains in the Greenback so far this week.

ASEAN, South Asia Event Risk – Bank of Thailand, Singapore Industrial Output, Chinese PMI

The ASEAN economic docket is fairly light heading into the end of the year. The Bank of Thailand (BOT) is expected to leave its benchmark lending rate unchanged at 0.50% on December 23. However, what will be more interesting to watch for is commentary towards the exchange rate. The BOT has been intervening to keep the Thai Baht from appreciating too quickly given economic concerns.

Check out my latest ASEAN technical report for USD/SGD, USD/IDR, USD/PHP and USD/THB levels!

Singapore industrial production on December 24th and then Chinese manufacturing PMI on the 31st will offer a further look into the health of global growth. Both economies can be quite sensitive to external developments, with the latter being a key trading partner throughout the ASEAN region. Thailand will also release current account figures on the 30th, which will carry important implications for local growth. The surplus is expected to fall to US$620 million in November from $985m in October.

Check out the DailyFX Economic Calendar for ASEAN and global data updates!

On December 22nd, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and the MSCI Emerging Markets Index fell to -0.63 from -0.78 one week ago. 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.