US Dollar Fell as SGD Rose, PHP Struggled. Trump’s Health, Stimulus Eyed

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

  • US Dollar cautiously fell versus ASEAN FX, IDR and PHP struggled
  • Capital was slowly flowing back into emerging markets as S&P rose
  • Key risks ahead: Trump’s health, US fiscal stimulus and Brexit talks

US Dollar ASEAN Weekly Recap

The haven-linked US Dollar succumbed to selling pressure this past week as US fiscal stimulus hopes likely ended the 4-week long losing streak in the S&P 500. Equities even brushed aside US President Donald Trump contracting the coronavirus, opening the door to political uncertainty ahead of the November election. A somewhat disappointing non-farm payrolls report was brushed aside.

Focusing on its performance against ASEAN currencies, the Singapore Dollar was one of the best-performing ones as well as the Malaysian Ringgit. Where the US Dollar held its ground was against the Indonesian Rupiah as net foreign equity outflows persisted. Meanwhile the Philippine Peso struggled as Benjamin Diokno, Governor of the local central bank, opened the door to further easing monetary policy.

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Last Week’s US Dollar Performance

US Dollar Fell as SGD Rose, PHP Struggled. Trump’s Health, Stimulus Eyed

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

S&P 500 Versus Emerging Market Capital Flows

With recent gains in US indices, it seems to have inspired a cautious inflow of capital back into Emerging Markets – see chart below. This may have contributed to some of the weakness seen in the US Dollar against its ASEAN peers. Currencies from developing markets can be quite sensitive to these flows. It is thus important to recognize external factors that could inspire volatility in the week ahead.

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US Dollar Fell as SGD Rose, PHP Struggled. Trump’s Health, Stimulus Eyed

External Event Risk – US Fiscal Stimulus, Donald Trump’s Condition, FOMC Minutes, Brexit Talks

With that in mind, all eyes still remain on US fiscal stimulus hopes and the ongoing health of the president. Last week, the Democratic-lead House of Representatives passed a $2.2 trillion package on party lines. Whether or not the bill makes it past the Senate remains to be seen, but further delay risk souring market mood as it did throughout most of September, opening the door to USD strength.

This is of particular importance given the FOMC minutes due on October 7th. There the Fed may reiterate some of its cautious commentary about the economic outlook without an urgent need to expand its liquidity-boosting measures. That increases the importance of a timely fiscal package as markets are forward-looking. Data out the US continues to broadly outperform relative to expectations, though by at a shrinking margin.

The debate between Vice President Mike Pence and Senator Kamal Harris is also on tap on Wednesday. Last week’s presidential debate inspired a slight ‘risk-off’ tilt in its aftermath as Joe Biden pulled ahead Donald Trump in the polls. Another source of market volatility could come from ongoing Brexit talks. Rising odds of a ‘no-deal’ could complicate global growth recovery prospects.

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ASEAN, South Asia Event Risk – Singapore Retail Sales and Maybe GDP, Philippine Trade Balance

The ASEAN economic docket in comparison is fairly light. Singapore will release the latest retail sales report. Local third-quarter GDP data may cross the wires between October 7th – 14th. This is as August’s Philippine trade data crosses the wires on October 9th. With that in mind, USD/SGD, USD/IDR, USD/MYR and USD/PHP may remain focused on external developments this week.

On October 2nd, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and the MSCI Emerging Markets Index increased to -0.90 from -0.88. 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

US Dollar Fell as SGD Rose, PHP Struggled. Trump’s Health, Stimulus Eyed

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

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