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Gaining Ground as ASEAN Weaken, Eyes on Fed Chair Powell

by kyngsam

US Greenback, Singapore Greenback, Thai Baht, Indonesian Rupiah, Indian Rupee, ASEAN, Elementary Evaluation – Speaking Factors

  • US Dollar largely strengthened versus ASEAN currencies this previous week
  • Rising longer-term Treasury yields, idling ASEAN equities key elements
  • ASEAN, Key Information Forward: Singapore CPI, Thailand commerce, Fed Chair

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US Greenback ASEAN Weekly Recap

Final week, the US Greenback noticed some power in opposition to ASEAN currencies. It was comparatively unchanged in opposition to the Singapore Greenback, whereas gaining floor in opposition to the Indonesian Rupiah and Thai Baht barely. A notable standout was the Philippine Peso, which weakened 0.85% in opposition to the Buck. Actually, USD/PHP rose probably the most since March, virtually one yr in the past. The MSCI Rising Markets Index fell about 0.5%.

Over the previous 5 buying and selling periods, international funds bought probably the most quantity of Philippine equities since late January, based on Bloomberg. These capital outflows could have pressured PHP, which will be fairly delicate to them. In the meantime, the Financial institution of Indonesia minimize its 7-day reverse repo charge to three.50% from 3.75% prior, as anticipated. Whereas USD/IDR gained, the central financial institution reiterated its dedication to upholding the Rupiah.

US Greenback, MSCI Rising Markets Index – Final Week’s Efficiency

US Dollar Forecast: Gaining Ground as ASEAN Weaken, Eyes on Fed Chair Powell

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

Exterior Occasion Danger – Treasuries, Fed Chair Jerome Powell

The notable slowdown in ASEAN forex good points this yr in comparison with nearly all of 2020 comes amid two key market developments. The primary is rising longer-term Treasury yields in the US. This can be a signal {that a} mixture of fiscal stimulus expectations, vaccine rollouts and international development bets are driving up native inflation expectations. The 10-year breakeven Treasury charge, a market-based gauge of CPI, is close to 2018 highs.

Rising charges of return from the US can work to cushion draw back potential within the Buck. In the meantime, ASEAN inventory market benchmarks are struggling to push into new highs. Actually, they’ve been consolidating for the reason that US Greenback discovered a backside earlier this yr – see chart beneath. Buyers could also be changing into more and more hesitant to park capital into riskier belongings as authorities bond yields begin providing higher returns.

With that in thoughts, all eyes are on Fed Chair Jerome Powell who shall be talking twice this week. As soon as on the central financial institution’s semi-annual financial coverage report back to the Senate Banking Committee on Tuesday. The opposite is throughout testimony earlier than the Congress Home Committee on Monetary Providers the following day. He could also be questioned about bond yields, however may reiterate the central financial institution’s dovish coverage stance.

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ASEAN, South Asia Occasion Danger – Singapore CPI and Industrial Manufacturing, Thailand Commerce

Specializing in the ASEAN financial calendar docket, the week forward is pretty quiet. USD/SGD has Singapore inflation and industrial manufacturing for stoking volatility. The outward-facing economic system will reveal additional perception into how the worldwide financial restoration is faring. Then on an identical be aware, USD/THB shall be awaiting Thailand’s newest commerce report for January.

There appears to be some rising divergence between sure ASEAN central banks. Whereas the Financial institution of Indonesia eased coverage final week, the Philippine Central Financial institution hinted that extra could not should be completed. Governor Benjamin Diokno mentioned that they’re fastidiously assessing the timing of unwinding coverage, including that there’s a restricted influence from any additional easing. That is Manila mulls an easing of motion restrictions.

Take a look at the DailyFX Economic Calendar for ASEAN and international information updates!

On February 19th, the 20-day rolling correlation coefficient between my ASEAN-based US Greenback index and an ASEAN ETF index modified to -0.41 from -0.44 one week in the past. Values nearer to 1 point out an more and more inverse relationship, although you will need to acknowledge that correlation doesn’t indicate causation – see chart beneath.

ASEAN-Based mostly USD Index Versus ASEAN ETF Index and Treasury Yields – Each day Chart

US Dollar Forecast: Gaining Ground as ASEAN Weaken, Eyes on Fed Chair Powell

Chart Created Using TradingView

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

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @ddubrovskyFX on Twitter

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