- FOREX reserves at BNM had improved during 1H of August. In USD terms, the overall reserves grew by 0.07% (or +RM0.1bil) from end of July. Nonetheless, reserves had fallen by a cumulative USD1.8bil (or -1.3%) as of YTD 2013.

- In Ringgit terms, reserves grew semi-monthly by RM0.05bil (or +0.01%) during the 1H of August. Reserves in Ringgit surged by a cumulative RM11.24bil (or +2.6%) YTD due mainly to FOREX translation gains.

- Currencies in emerging Asia were mixed on Thursday after the Federal Reserve minutes (released the day before) were unable to provide any clarity on the future of its stimulus programme.

- Meanwhile, the upbeat manufacturing data in China provided some currency support. HSBC said preliminary readings showed that manufacturing PMI for China rose to 50.1 in August compared with a final reading of 47.7 in the preceding month.

- Based on yesterday’s closing, we note that the Indian Rupee had depreciated steeply against the USD to close at INR64.35 per USD (or -0.9% from Wednesday’s closing).

- The Ringgit plummeted to a 3-year low against the Dollar yesterday to close at RM3.31 per USD (or -0.03% from Wednesday’s closing). On a YTD basis, Ringgit had declined by 8.2%. Ringgit was last seen above RM3.30 in June 2010.

- Aside from outflows due to anticipation of the US tapering off its QE, Malaysia’s weak current account surplus has probably exacerbated selling pressure on Ringgit yesterday.

- Going forward though, Malaysia is expected to maintain a current account surplus for the rest of this year. Bank Negara Malaysia Governor Zeti Akhtar Aziz said that Malaysia could cope with the "highly destabilising" capital flows currently.

- We do foresee Ringgit to remain weak in the near term pending on the Fed’s decision regarding the unwinding of the QE. The upcoming Federal Open Market Committee meets on September 17-18.

Source: AmeSecurities