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US Dollar Outlook: Federal Reserve in Focus for SGD, THB, IDR, PHP Amid Covid Risks

US Dollar Outlook: Federal Reserve in Focus for SGD, THB, IDR, PHP Amid Covid Risks

Daniel Dubrovsky, Senior Strategist

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

  • US Dollar gained against ASEAN currencies, Covid case growth slowing?
  • Fluid coronavirus situation and lockdown risks still leave outlook uncertain
  • Federal Reserve rate decision is also in focus for QE tapering prospects
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US Dollar ASEAN Weekly Recap

The US Dollar extended gains against ASEAN currencies such as the Singapore Dollar, Thai Baht, Indonesian Rupiah and Philippine Peso last week. Albeit, its appreciation fizzled into the weekend as Covid case growth in the Emerging Asia-Pacific region slowed – see chart below. As I have been writing about lately, monitoring the coronavirus and implications for growth in the region remain key to the outlook for these currencies.

Indonesia has been somewhat of a standout as of late, with daily infections clocking in above 50k per day. This past week, the Bank of Indonesia lower third-quarter economic growth estimates as it left benchmark lending rates unchanged. Meanwhile, Singapore halted indoor dinning, cutting social gatherings to no more than two people. This is expected to last until August 18th.

Covid Cases in Singapore, Thailand, Indonesia, Philippines - Averaged

Covid Cases in Singapore, Thailand, Indonesia, Philippines - Averaged

Chart Created Using TradingView

Key ASEAN Event Risks – Delta Covid Variant, Lockdowns, Federal Reserve

Since early June, investors have been dumping equities from the ASEAN region, fueling capital flight woes which have been benefiting the haven-linked US Dollar. On the chart below is my custom ASEAN-based ETF index. It is hovering around the lowest since November 2020, down over 10 percent since January’s peak. This means it has met the technical definition of a market correction.

Indonesia plans to gradually ease Covid restrictions this week, but the government was adamant that it could reimpose curbs if the situation worsens. In the Philippines, the government reinstated outdoor restrictions for children 5 years and older in the capital. The nation also imposed a travel ban between Malaysia and Thailand as Benjamin Diokno, governor of the central bank, noted that Covid poses a risk to the economy.

The Bank of Thailand echoed similar comments from the Philippine Central Bank this past week, saying that coronavirus curbs are adding to growth risks. It added that the outbreak may cut 2021 GDP by as much as 2 percentage points. To help its economy, Singapore offered a fiscal package to offset last week’s virus restrictions, totaling about SGD$1.1 billion.

Outside of Covid cases, ASEAN currencies will be closely eyeing the Federal Reserve rate decision on Wednesday. Rising inflationary pressures in the United States have been bringing forward quantitative easing tapering expectations. Still-dovish commentary, especially amid recent Covid cases, could cool these bets further. That may offer relief for USD/SGD, USD/THB, USD/IDR and USD/PHP.

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ASEAN, South Asia Economic Data – Singapore Unemployment Rate, Thailand Trade Balance

Focusing on the ASEAN economic docket, the week ahead is relatively deprived of major event risk. Singapore industrial production and unemployment data are on tap for USD/SGD. Meanwhile, USD/THB will be eyeing local trade data. The importance of Covid cases, lockdown threats and capital flight risk likely places the focus for ASEAN currencies on regional market sentiment in the week ahead. That will likely leave them vulnerable to a developing and fluid environment.

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

On July 23rd, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and my ASEAN ETF index remained changed at -0.96 from 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 ASEAN ETF Index – Daily Chart

ASEAN-Based USD Index Versus ASEAN ETF 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.