MYR: The Ringgit Steadies Above Key Resistance

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

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.

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.