MYR: The Ringgit Steadies Above Key Resistance
- The Ringgit is steady today at 4.2058 as it tries to break the resistance level of 4.2050 which it has bounced around since May. It has closed below that level several times yet unable to hold below for more than a day or two.
- It has trended around the 20-day EMA for some time also, which it traded below and held over the last few trading days.
- Following period of weakness that began in October last year, the Ringgit has traded in increasingly tighter ranges since May as volatility declined.
- There has not been a rapid depletion of FX reserves, suggesting that the BNM is not behind the smoothing of volatility. Foreign demand for equity is not behind it either as the returns from the FTSE Malay KLCI over the last six months at +6.9% significantly lag the JCI of +24% or the KOSPI of +42%. Foreign participation in the MGS market is only around 20% suggesting that this isn't the driver either.
- Malaysia's growth is forecast to be relatively stable over the next few years around +4.0 - 4.3% suggesting that investors could be turning to higher growth alternatives to invest rather than MYR related assets.
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AUSTRALIA DATA: Current Account Deficits Continue, Net Exports Added 0.1pp
While Q2 recorded its ninth consecutive quarterly current account deficit, it narrowed from Q1 driven by the primary income deficit. Q2 printed at -$13.7bn after $14.1bn with primary income at -$16.8bn down from Q1’s -$18bn but the goods and services surplus was down $1.2bn at $3.1bn, the lowest in 7 years. Net exports contributed 0.1pp to Q2 growth, as expected.
Australia current account A$bn
- Given that the balance of payments data is nominal, the 4.5% q/q fall in merchandise export prices pressured the trade surplus. The goods surplus fell $1bn to $12.7bn in Q2 while services deficit rose $0.2bn to $9.6bn.
- The terms of trade fell 1.1% q/q & 2.4% y/y due to lower prices for exported coal and iron ore.
- Goods exports fell 0.9% q/q to be up 0.4% y/y driven by a 1.5% q/q decline in non-rural goods. Services exports rose 3.6% q/q & 7.9% y/y, the third consecutive quarterly increase, due to increased visits from New Zealanders.
- Merchandise imports fell 0.2% q/q in Q2 driven by a 1.2% q/q decline in capex and a 6.5% q/q in intermediate goods, as imported petroleum prices fell 11.5% in the quarter. Consumer goods imports rose 3.9% q/q & 3.8% y/y, possibly signalling some recovery in spending. Services imports increased 3.4% q/q to be up 7.8% y/y driven by overseas travel.
Australia terms of trade
Source: MNI - Market News/ABS
CHINA PRESS: Yuan Could Face Further Appreciation This Year
The expected U.S. Federal Reserve rate cut in September and potential positive outcome in China-U.S. trade talks could drive further appreciation of the yuan this year, on top of capital inflows amid the A-share rally, Yicai.com reported citing analysts. The offshore yuan is close to breaking below 7.1 against the U.S. dollar, which may trigger increased foreign exchange settlement by exporters. In July, the proportion of forex settlement by exporters surged from 46.1% to 54.9%, reaching a new high since September 2024, indicating increasing willingness to sell dollars, the newspaper said.
CHINA PRESS: September Liquidity To Remain Stable
Inter-bank market liquidity will likely remain stable in September amid fiscal spending and central bank support, despite a large amount of open market maturities, Shanghai Securities News reported citing analysts. Over CNY3.2 trillion of funds will mature in reverse repos and three-month outright reverse repo in the first week, alongside CNY300 billion six-month outright reverse repo and CNY300 one-year medium-term lending facilities later in the month, the newspaper said. However, the issuance of government bonds and the allocation of fiscal funds will add nearly CNY190 billion of excess reserves to the banking system, with regular fiscal revenue and expenditure likely to provide more than CNY1.1 trillion of liquidity support, the newspaper said citing analysts from Sealand Securities.
