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US Dollar Outlook: SGD, THB at Risk as Treasury Yields Rise. USD/PHP Eyeing BSP

US Dollar Outlook: SGD, THB at Risk as Treasury Yields Rise. USD/PHP Eyeing BSP

Daniel Dubrovsky, Contributing Senior Strategist


What's on this page

US Dollar, Singapore Dollar, Thai Baht, Indonesian Rupiah, Indian Rupee, ASEAN, Fundamental Analysis – Talking Points

  • US Dollar gained versus SGD, THB despite a broadly ‘risk-on’ tone
  • Rising medium-term US inflation bets may be aiding the Greenback
  • APAC, ASEAN data: Philippine Central Bank, INR eyeing Indian CPI
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US Dollar ASEAN Weekly Recap

The haven-linked US Dollar gained against ASEAN currencies last week such as the Singapore Dollar and Thai Baht. This is despite a recovery in risk appetite, aiding to push the MSCI Emerging Markets Index (EEM) 4.52%. Market volatility cooled as traders looked past “short squeezes” that were triggered in heavily sold stock towards the end of January.

A couple of notable standouts were the Indonesian Rupiah and Philippine Peso. The Bank of Indonesia may have intervened to keep USD/IDR under pressure as it ensured stable valuation in its exchange rate. Thus, further gains in the Greenback may be met with stronger measures from the Indonesian central bank. In South Asia, the Indian Rupee gained as the RBI left benchmark lending rates unchanged.

US Dollar, Emerging Markets Index – Last Week’s Performance

US Dollar, Emerging Markets Index  Last Week's Performance

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

External Event Risk – Treasury Yields, Fiscal Stimulus, US CPI and Sentiment

Helping to stabilize the Greenback despite rising equities, which can at times pressure the USD, has likely been the story in longer-dated Treasury yields. This past week, the 30-year rate closed at its highest since February 20th. The 10-year also followed. This likely reflects rising economic recovery bets, aiding to push higher inflation expectations down the road.

Indeed, this can be seen by looking at breakeven government bond rates, where the 10-year yield climbed to its highest since May 2018. This is likely being driven by US fiscal stimulus expectations as the nation sees daily coronavirus infection rates on the decline. Democrats in Congress seem to be leaning towards passing President Joe Biden’s US$1.9 trillion Covid relief package through budget reconciliation.

Reports crossed the wires at the end of last week that Biden may drop plans to add minimum wage increases to the bill. That may increase the odds of the bill passing given a lack of Republican support. As such, in a relatively quieter week for economic data, investors may continue to focus on inflation expectations in the medium term. Speaking of which, US CPI is on tap this week as well as University of Michigan sentiment.

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ASEAN, South Asia Event Risk – Philippine Central Bank, Indian CPI and Industrial Production

The ASEAN economic docket is also fairly light, with the Philippine Central Bank (BSP) being the notable exception. The BSP is expected to leave its overnight borrowing rate at 2.00%. As such, USD/PHP may be glued to external fundamental developments. USD/INR will be eyeing Indian industrial production and CPI figures on Friday. Weakening inflation has been boosting RBI rate cut bets. Softer prints may offer USD/INR upside potential.

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

On February 5th, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and an average of 10-year and 30-year Treasury yields stayed fairly steady at 0.44 from 0.45 one week ago. Values closer to +1 indicate an increasingly positive 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/THB and USD/PHP

-- Written by Daniel Dubrovsky, Strategist 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.