ASEAN Outlook Talking Points – Philippine Central Bank, CPI, Trade Wars, Foreign Reserves
- USD[1] gains last week weighed on most ASEAN currencies apart for the Philippine Peso
- Rising bets of a BSP rate hike lifted PHP ahead of this week’s monetary policy decision
- Ahead, we will see how the Philippines & Indonesia have been combating FX weakness
- USD/PHP fell below support as expected while upside momentum faded, 52.32 next?
We recently released our 3Q forecasts for the US Dollar and equities in the DailyFX Trading Guides page[2]
Most ASEAN bloc currencies came under pressure to a rising US Dollar this past week as expected[3]. Indonesian CPI and Malaysian trade balance data failed to offer a meaningful reaction for the Indonesian Rupiah and Malaysian Ringgit respectively. Rather, the focus was on external factors where the greenback appreciated across the board thanks to a relatively less hawkish Bank of England interest rate announcement[4].
One regional currency that outperformed was the Philippine Peso which may have been as a result of hawkish bets ahead of this week’s central bank interest rate announcement. Indeed, the Philippine 3-year government bond yield rose throughout the latter half of last week. To help combat higher inflation, the Philippine central bank is expected to raise the overnight borrowing rate by 50 basis points to 4.0%.
However, some expectations are calling for a 25 basis point increase on Thursday. Whether it could be 25 or 50 may be influenced by a local inflation report on Tuesday. Philippine CPI is expected to rise from 5.2%
