US Dollar Might Fall as PHP, SGD Rise – USD/INR Eyes Sino-India Tensions
US DOLLAR, PHILIPPINE PESO, MALAYSIAN RINGGIT, INDONESIAN RUPIAH, SINGAPORE DOLLAR – KEY POINTS
- US dollar weakness against the ASEAN currencies as stocks rise
- USD/SGD, USD/PHP, USD/MYR, USD/IDR forecast biased lower
- Sino – India border tensions stir volatility in Nifty 50 and INR
US DOLLAR ASEAN RECAP
The haven associated US extended losses against their ASEAN peers last week. The Philippine peso, Malaysian Ringgit, Indonesian Rupiah, and the Singapore dollar gained some ground. As expected, the attention for the ASEAN currencies still remained on all the external developments considering a lighter local economic docket. The dovish central bank seemed to be an important factor that nudged equities higher, further denting the US Dollar.
Another significant point in the emerging forex market is the Indian rupee. The USD/INR dropped 2% in a week, which was the biggest drop for the past 2 years. The combination of the Indian reserve bank and capital inflows refraining from being part of the foreign exchange market fueled the aggressive gains that have been seen in the rupee as the Japanese yen forecast, Nikkei 225 facing key resistance, and the AUD/JPY is poised to rise
EXTERNAL EVENT RISK – ISM SERVICES & MANUFACTURING DATA
It’s quite interesting to see that the USD/MYR, USD/PHP, USD/IDR, and USD/SGD seem to focus on the technical dynamics that fuel equity valuations in the USA instead of from the emerging markets. Investors seem to look into the US for insights into the way the global growth might develop.
The ISM services and manufacturing data is due on Thursday and Tuesday respectively. On Wednesday, the durable commodities will cross the available wires. Afterward, the week will end with possibly the most impactful event risks, which are the non-farm payrolls. On the other hand, the CESI (Citi Economic Surprise Index) tracking the United States continued to rise in positive territory. This shows that economists are still underestimating the vigor and health of the economic recovery.
Nevertheless, the measure just dropped to the lowest levels since July, possibly showing that the expectations are steadily aligning near reality. The environment with reducing rosy beats in the data might possibly cool the weak pace in the DXY index in case the stock’s gains finally level out. Nevertheless, the broader pattern for the US Dollar might remain bearish with the central bank currently allowing inflation to overshoot target for a short duration.
Technically speaking, the volatility risk is still holding for the ASEAN currencies.
ASEAN EVENT RISK – CHINA-INDIA TENSIONS, SINGAPORE RETAIL SALES, PHILIPPINE CPI
Paying attention to the ASEAN event risk, the Singapore Dollar and the Philippine Peso face retail sales and local CPI data respectively. Early this month, the Philippine Central Bank (BSP) stopped cutting the rates amidst increasing short-term inflation patterns. The high than expected inflation that eases bets might provide extra support to the PHP.