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Fundamental Analysis – Talking Points: US Dollar, Singapore Dollar, Thai Baht, Indonesian Rupiah, Philippine Peso, ASEAN The US dollar is strengthening versus ASEAN currencies, owing to a spike in the Delta Covid variation. Longer lockdowns could raise USD/THB, USD/IDR, and USD/PHP in the near future. Keep an eye on the US CPI; a higher reading could exacerbate ASEAN market volatility. Recap of the US Dollar in ASEAN for the Week The US Dollar made significant gains against ASEAN currencies this week, particularly against the Thai Baht and the Philippine Peso. This is due to the fact that the Singapore Dollar and the Indonesian Rupiah were both reasonably stable. The performance of the greenback has been closely aligned with weakness in ASEAN equities, which has coincided with an increase in local coronavirus infections – see figure below. According to Bloomberg, Thailand, the Philippines, and Malaysia have had the largest outflows of equities since the third quarter of 2020. Covid Cases in Singapore, Thailand, Indonesia, and the Philippines – TradingViewKey Created AveragedChart Delta Covid Case Growth, Lockdowns, and US Inflation Report – ASEAN Event Risks With that in mind, ASEAN coronavirus cases may continue to have a significant impact on the combined direction of USD/SGD, USD/THB, USD/PHP, and USD/IDR. For most of these countries, the developing Delta variation is proving to be a difficult headwind. According to Reuters, enough doses have been provided in Indonesia, the Philippines, and Malaysia to inoculate 9.1%, 5.8%, and 16.3 percent of their respective populations. This is based on the assumption that each person requires two doses. As a result, the prognosis for currencies like the Indonesian Rupiah, Philippine Peso, and Thai Baht could be clouded by ongoing lockdowns and the threat of tighter ones. Thailand’s government is considering a partial shutdown after the former country recently increased statewide Covid restrictions. These restrictions are anticipated to continue eroding economic development prospects, prompting investors to withdraw funds from equities and increasing capital outflows. This is something that the US Dollar, which is related to safe havens, could profit from. Meanwhile, another threat to ASEAN currencies is on the horizon. On Tuesday, the United States will release its next CPI data. Headline and core consumer prices are predicted to rise 4.9 percent and 4.0 percent y/y in June, respectively, compared to 5.0 percent and 3.8 percent in May. The Fed continues to view rising price pressures in the near term as temporary. However, if the conclusion is better than predicted, monetary tightening expectations may be pushed forward. For SGD, THB, PHP, and IDR, this is a significant risk. A softer outcome, on the other hand, could aid to moderate ASEAN currency decline. Chinese trade and GDP, Singapore GDP, Indian CPIF – ASEAN, South Asia Economic Data The week will begin with Indian inflation statistics, with a focus on ASEAN and South Asia economic event risk. As Covid instances rise, elevated price increases may limit the extent to which the RBI may loosen policy to boost the economy. On Thursday, the USD/SGD will be watching Singapore’s GDP, which is expected to expand 14.3% year on year in the second quarter. The pair, though, may continue to be vulnerable to overall market sentiment. China, a major economic partner for ASEAN nations, will publish trade and GDP figures. Signs of deterioration in this important regional economic powerhouse risk contributing to the gloomy market atmosphere. For ASEAN and global data updates, see the DailyFX Economic Calendar! The 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and my ASEAN ETF index moved to -0.93 on July 9th, up from -0.97 the previous week. Closer values to -1 indicate a more inverse association, yet it’s crucial to remember that correlation doesn’t always imply causality. Daily ChartChart Using TradingView* of ASEAN-based USD Index vs. ASEAN ETF Index USD/SGD, USD/IDR, USD/THB, and USD/PHP are the averages of the ASEAN-based US Dollar Index. — Daniel Dubrovsky is a strategist for DailyFX.com. Use the comments area below to reach out to Daniel, or follow him on Twitter at @ddubrovskyFX./nRead More

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