SGD, IDR, PHP, THB Eyeing Fed and US Fiscal Policy Impact

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

  • US Dollar weakened against most ASEAN currencies as bonds yields fell
  • Eyes are on Federal Reserve amid corporate & capital gains tax hike bets
  • The ASEAN economic docket is quiet, placing focus on external newsflow

US Dollar ASEAN Weekly Recap

The haven-linked US Dollar underperformed against most ASEAN currencies this past week, weakening against the Singapore Dollar, Indonesian Rupiah and Philippine Peso. This is as sentiment improved in developing economies as the MSCI Emerging Markets Index gained 0.52%. A notable standout was the Thai Baht, which weakened against USD. Rising Covid cases in Thailand likely unnerved investors, sending the local benchmark stock index lower.

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

US Dollar Outlook: SGD, IDR, PHP, THB Eyeing Fed and US Fiscal Policy Impact

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

External Event Risk – Federal Reserve, Corporate and Capital Gains Tax Bets

ASEAN currencies can be quite sensitive to the direction of capital flows, which are heavily influenced by borrowing costs in the world’s largest economy. Recent gains in SGD, IDR and PHP have occurred amidst falling longer-term Treasury yields. If this trend continues, alleviating foreign debt repayment woes, then ASEAN FX may continue gaining. A weaker US Dollar may further amplify this dynamic.

The Federal Reserve is in focus this week, with April’s monetary policy on tap Wednesday. The central bank has been reiterating its accommodative stance and downplaying rising inflation expectations. Chair Jerome Powell has been saying that the central bank views near-term price pressures as a transitory effect. If similar language is repeated ahead, then bond rates may continue weakening.

This may be amplified by rising expectations of US corporate and capital gains tax hikes. Last week, President Joe Biden unveiled a near-doubling of the latter for those who make over US$1 million as part of the ‘American Families Plan’. Further details are expected to be released this week. Such policy prescriptions may alleviate pressure off the Fed to unwind its lose policy, thus favoring ASEAN currencies.

With that in mind, keep an eye out for how the central bank may approach policy given the fiscal background. US first-quarter GDP and PCE data are on tap. But, higher-than-expected prints may not necessarily drive Treasury rates higher if the central bank is not anticipated to act on policy in the near term. Earnings season is also in full swing, with key companies like Alphabet, Facebook and Tesla reporting.

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ASEAN, South Asia Event Risk – Singapore Industrial Production, Chinese Manufacturing PMI

The ASEAN and South Asia economic calendar docket is fairly quiet in the week ahead. On Monday, Singapore will release industrial production. Output is expected to increase 2.3% y/y in March, much weaker than the 16.4% prior outcome. Given the city-state’s dependence on the external sector, the data could offer further insight into the state of global growth. Chinese manufacturing PMI is then due on Friday. The nation is a key trading partner for ASEAN countries. Thus, improving data from the world’s second-largest economy could spill over, given that it is essentially an economic engine for ASEAN.

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

On April 23rd, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and the MSCI Emerging Markets index changed to -0.64 from -0.70 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 and Treasury Yields – Daily Chart

US Dollar Outlook: SGD, IDR, PHP, THB Eyeing Fed and US Fiscal Policy Impact

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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