Turning Level Reached? USD/SGD, USD/THB, USD/IDR, USD/PHP

US Greenback, Singapore Greenback, Thai Baht, Indonesian Rupiah, Philippine Peso, ASEAN, Elementary Evaluation – Speaking Factors

  • US Dollar stabilizes towards ASEAN currencies as danger urge for food weakens
  • Rising inflationary woes locations give attention to US GDP and PCE financial information
  • A wildcard might come from tech earnings corresponding to Amazon, Apple and Fb

US Greenback ASEAN Weekly Recap

The US Greenback paused its descent towards ASEAN currencies final week such because the Singapore Greenback, Thai Baht, Indonesian Rupiah and Philippine Peso. This meant it stabilized following persistent losses since early October. Looking on the chart beneath, the US Greenback’s consolidation was related to a stabilization of ASEAN inventory market indices.

Rising Market indices turned greater across the time the S&P 500 bottomed in early October, underscoring their sensitivity to basic danger urge for food. This elementary dynamic additionally tends to increase into ASEAN currencies, which might be fairly delicate to capital flows coming out and in of Rising Markets. As such, this can seemingly proceed being the main target for the USD towards creating market currencies forward.

MSCI ASEAN Indices – 4-Hour Chart

US Dollar Forecast: Turning Point Reached? USD/SGD, USD/THB, USD/IDR, USD/PHP

Chart Created Using TradingView

Exterior Occasion Danger – US GDP and PCE Information, Tech Earnings

This previous week, inflationary issues had been again on the forefront of buyers’ issues. The 10-year Treasury breakeven fee hit its highest since 2005, reflecting rising future inflation expectations. This was additionally related to extra hawkish Federal Reserve financial coverage expectations. To see this, look no additional than the front-end 2-year Treasury yield, which touched a brand new excessive this yr up to now.

Because the central financial institution is anticipated to start tapering subsequent month, the downward stress that has been maintaining front-end charges close to zero will seemingly raise. This causes the return on risk-free charges to rise, providing extra competitors to riskier belongings, which are usually located in Rising Markets. This, plus a rising US Greenback, can also make creating market debt repayments tougher.

As such, all eyes are on US GDP and core PCE information this week. Progress on the planet’s largest economic system is anticipated to materially gradual within the third quarter. The q/q estimate is at 2.8% versus 6.7% in Q2. Then on Friday, the central financial institution’s most well-liked gauge of inflation is anticipated to clock in at 3.7% y/y in September versus 3.6% prior. A mix of slowing progress and excessive inflation dangers destabilizing the economic system.

A wildcard would possibly come from earnings season. Forward, all eyes are on key tech corporations corresponding to Amazon, Apple and Fb. Dismal outcomes from Snap Inc. and Intel pressured tech stocks last week. Whereas the Nasdaq 100 nonetheless completed final week’s session greater, it trimmed losses on Friday. Equally mushy earnings forward may produce danger aversion, sending USD/SGD, USD/THB, USD/PHP and USD/IDR greater on common.

Try the DailyFX Economic Calendar for ASEAN and international information updates!

ASEAN, South Asia Financial Information – Singapore CPI and Industrial Manufacturing, Thailand Commerce

With that in thoughts, the main target for ASEAN currencies might stay on exterior dangers within the week forward. Information corresponding to Singapore CPI and industrial manufacturing, and Thailand commerce figures could also be brushed apart. The correlation between a customized ASEAN-based US Greenback index and the MSCI Rising Markets index stays deeply damaging, see chart beneath.

On October 22nd, the 20-day rolling correlation coefficient between my ASEAN-based US Greenback index and the MSCI Rising Markets Index modified to -0.94 from -0.74 one week in the past. Values nearer to 1 point out an more and more inverse relationship, although it is very important acknowledge that correlation doesn’t indicate causation.

ASEAN-Based mostly USD Index Versus EEM Index – Day by day Chart

US Dollar Forecast: Turning Point Reached? USD/SGD, USD/THB, USD/IDR, USD/PHP

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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