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US Dollar and Emerging Market Currencies Eyeing FOMC Minutes this Week

US Dollar and Emerging Market Currencies Eyeing FOMC Minutes this Week

Daniel Dubrovsky, Contributing Senior Strategist
What's on this page

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

  • US Dollar stabilizes against Emerging Market currencies
  • Traders closely eyeing the FOMC meeting minutes ahead
  • Philippine and Thailand CPI also in focus for PHP & THD
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US Dollar ASEAN Weekly Recap

This past week, the US Dollar continued to stabilize against ASEAN currencies such as the Singapore Dollar, Thai Baht, Indonesian Rupiah and Philippine Peso. Broadly speaking, the Greenback remains lower against Emerging Asia currencies since the March Federal Reserve interest rate decision. This follows broad gains in ASEAN indices, signaling that investor confidence has been improving – see chart below.

MSCI ASEAN Indices 4-Hour Chart

MSCI ASEAN Indices 4-Hour Chart

Chart Created Using TradingView

External Event Risk – Ukraine, Yield Curve, FOMC Minutes

Emerging Market currencies tend to be quite sensitive to global risk trends when comparing them against the US Dollar – see chart below. As such, the flow of capital into and out of the developing world can be important to follow. A gauge of this from Bloomberg is sitting at its highest since early February after finding a bottom on March 14th.

Russia’s attack on Ukraine has been playing a key role. It seems that traders have materially repriced their expectations of the war impacting general risk appetite. Taking a look at the Russian Ruble, USD/RUB has fallen from a high of 154.25 after the attack, to last week’s close of 85.00. RUB is now trading around levels seen prior to the invasion and the local stock market seems to have avoided a total meltdown.

The situation still remains volatile, but traders may shift back to the underlying issue placing Emerging Markets at risk, the Federal Reserve’s tightening cycle. Geopolitical tensions in Europe may bolster food and energy prices, perhaps pushing to a more hawkish central bank. The markets are also starting to price in a recession given that a key gauge of the US yield curve has inverted.

With that in mind, traders are going to be eyeing the FOMC meeting minutes on Wednesday. Traders will be awaiting what is going to be in store for tapering the Fed balance sheet. The S&P 500 ended flat in a week when the central bank reduced its asset holdings. This could spell trouble for risk appetite in the coming months, leaving the US Dollar in a position to capitalize against Emerging Market currencies.

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ASEAN Event Risk – Philippine and Thailand CPI, Singapore Retail Sales

Turning towards the ASEAN economic docket, there are a couple of prints to keep an eye out for. These include March Philippine and Thailand CPI data for USD/PHP and USD/THB respectively. These are expected to cross the wires at 3.9% y/y and 5.6% y/y respectively. Singapore will also release retail sales, which are expected to increase 4.8% y/y in February.

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

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On April 1st, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and the MSCI Emerging Markets Index changed to -0.85 from -0.91 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 EEM Index – Daily Chart

ASEAN-Based USD Index Versus EEM 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

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