ASEAN Outlook Talking Points:
- Despite an end of week US Dollar[1] pullback, MYR, IDR and SGD depreciated
- IDR looks to rate hike but may keep falling with others as USD[2] rise resumes
- USD/SGD[3] downside reversal warning sign has faded, faces key resistance
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Despite the pullback in the US Dollar towards the end of last week, most ASEAN bloc currencies depreciated against it. The Indonesian Rupiah fell more than one percent after trading reopened following the Eid al-Fitr holiday, having a chance to react to previous greenback gains. One notable standout was the Philippine Peso which appreciated about 0.10% against USD last week.
PHP strength could be thanked for via the Philippine central bank which raised rates to 3.75% from 3.50%. As anticipated[5], Bangko Sentral ng Pilipinas lowered future interest rate expectations in 2018 and 2019 which could have lead to a weakening of interest rate hike bets and thus hurt the respective currency. However, commitment from the Governor to keep speculators at bay seemed to have worked and prevented PHP volatility.
Comments from Philippine Central Bank Governor Espenilla:
- We will use everything in our toolbox to keep order in our domestic market
- If speculative activity is driving excessive volatility, there are specific things the BSP can do within its full regulatory powers
- There is potential for further policy action
Meanwhile the Bank of Indonesia stepped in
