ASEAN Outlook Talking Points:
- Indonesian Rupiah & Philippine Peso await local inflation data and foreign reserves
- It is hard not to ignore the impact of US Dollar[1] direction for ASEAN bloc currencies
- USD/PHP uptrend is being overshadowed by a reversal warning sign, bulls beware
We just released our 3Q forecasts for currencies like the US Dollar in the DailyFX Trading Guides page[2]
Last Week’s Recap
A pullback in the US Dollar towards the end of last week[3] resulted in ASEAN bloc currencies paring some of their losses against the Greenback. One particular standout was the Indonesian Rupiah which got some help from its associated central bank. The Bank of Indonesia surprised markets when it raised rates by 50 basis points to 5.25% from 4.75%. This was 0.25% higher than expected.
The unexpected outcome left its mark on IDR and a combination of USD[4] weakness led USD/IDR lower. Bank of Indonesia shifted their stance to tightening and pledged to maintain pre-emptive monetary policy as they guard the Rupiah in line with the fundamentals. Meanwhile, the Singapore Dollar didn’t show much enthusiasm for a local inflation report as expected[5]. There, CPI core was 1.5% y/y versus 1.4% anticipated.
A Look Ahead
More is to come this week from Indonesia where on Monday, we will get June’s inflation report. There, the headline rate is anticipated coming down to 3.00% y/y from 3.23%. In fact, from last week’s monetary policy announcement, the central bank forecasted inflation coming in between 2.5%-4.5% this year and next. Higher rates of inflation may bolster IDR and vice versa, but keep
