Malaysia

Spike in Government Bond Yields. A weaker ringgit coupled with external headwinds have caused yields for Malaysian Government Securities (MGS) to climb to as much as 50 basis points (bp) since July. In over a month, the yield for 10-year MGS rose over 40bp from 3.9% to 4.31% – the highest since January 2010. The yield for seven-year MGS increased by 50bp from a low of 3.8% to 4.3% yesterday. Outflows were seen across all debt instruments, which saw Government Investment Issues and MGS down by RM3bil in total in the month of July. Including bonds issued by the private sector, foreign holdings reported net outflows of RM5.2bil as at end-July. Total foreign ownership came down by 2.45% to RM206.8bil from RM211.93bil in June. (The Star)

Pegging Ringgit Costly for Malaysia: S&P. Pegging the ringgit to counter the weakening currency trend using Bank Negara Malaysia's (BNM) reserves could be expensive for Malaysia, according to Standard & Poor's Ratings Services. Its Asia-Pacific Economist Vincent Conti said that emerging market currencies are all likely to face a weakening trend over the next few years. In Malaysia, this will be amplified by the low commodity prices, given its status as a net energy exporter. Using up reserves to artificially strengthen the currency would be detrimental to Malaysia's competitiveness relative to other emerging markets and commodity exporters. The ringgit closed at 4.0820 to the US dollar on Tuesday. (Bernama)

Asia

Japan July Exports Rise 7.6% on Year. Japan's exports rose 7.6% in July from a year earlier, Ministry of Finance data showed on Wednesday, in a sign overseas demand is holding steady. The rise was more than the 5.5% annual increase expected by economists. It followed a 9.5% year-on-year rise in June. Imports fell 3.2% year-on-year in July versus the median estimate for a 7.9% annual decrease. The trade balance came to a deficit of 268.1 billion yen ($2.16 billion), versus the median estimate for a 56.7 billion yen deficit. (Reuters)

Indonesia Posts $1.33 Billion Trade Surplus in July. Indonesia posted a surprisingly large trade surplus in July at $1.33 billion from a revised $528 million in June, the statistics bureau said on Tuesday. A Reuters poll had estimated the country would post an eighth straight month of trade surplus at a smaller $520 million in July. Exports in July were $11.41 billion, down 19.23% from a year earlier, while imports were $10.08 billion, down 28.44%. (Reuters)

Indonesia Central Bank Holds Rates. Indonesia's central bank kept its key policy rate unchanged on Tuesday for the sixth straight meeting, as expected, saying the focus of monetary policy was maintaining the rupiah's stability. Indonesia is growing at its weakest pace in six years, but the central bank has to balance loosening policy to spur growth against financial market volatility and the risk of capital outflows. Bank Indonesia (BI) kept its policy rate at 7.50%. (Reuters)

Australia Central Bank Steers Steady Policy Course. Australia's central bank said leaving interest rates at record lows this month was appropriate as it noted that the economy was adjusting to the end of the mining investment boom. In minutes of its August 4 policy meeting, the Reserve Bank of Australia (RBA) also said a weaker Australian dollar was helping exports, a departure from previous meetings when the bank said the currency needed to fall further. The central bank kept its cash rate steady at 2.0%. (Reuters)

China’s Central Bank put $93 Billion into Development Banks in July. China's central bank stepped up support for the cooling economy last month by injecting $93 billion into two leading development banks to strengthen their capital bases and increase financing to critical sectors. The People's Bank of China said it pumped $48 billion into China Development Bank and $45 billion into the Export-Import Bank of China last month. The cash will lift the capital adequacy ratios of the two lenders to between 11.4% and 12.8%, the central bank said. (Reuters)

South Korea’s July Producer Prices Fall at Fastest Clip since 1999. South Korea's producer prices dropped in July at their fastest pace since early 1999, central bank data showed on Wednesday, as manufactured goods prices were dragged down by weak global oil prices. The producer price index in July fell 4.0% from a year earlier, the Bank of Korea said, extending a falling streak that started in August last year. It was the sharpest decline seen since the index slid 4.1% on-year in April 1999. Mainly to blame for the fall in producer prices last month were industrial goods, which have the heaviest weighting on the index, and dropped by 6.6%. (Reuters)

USA

Housing Starts Near Eight-Year High. U.S. housing starts rose to a near eight-year high in July as builders ramped up construction of single-family homes. The Commerce Department report on Tuesday added to solid payrolls, retail sales and industrial output data in suggesting the economy got off to a strong start in the third quarter. Housing starts have now been above a one million-unit pace for four straight months. Economists had forecast groundbreaking on new homes rising to a 1.19 million-unit pace last month. (Reuters)

U.S. Economy on Track to Grow 1.3% in Third Quarter. The U.S. economy is on track to grow at an annualized rate of 1.3% in the third quarter following news of a stronger-than-expected 0.6% rise in industrial output in July, the Atlanta Federal Reserve's GDPNow forecast model showed on Tuesday. This was stronger than the regional Fed bank's prior estimate on Aug. 13 of a 0.7% rise in GDP, the Atlanta Fed said on its website. (Reuters)

Europe

UK Inflation Rate Edges up Slightly. Britain's annual inflation rate edged up to 0.1% in July - the sixth month in a row it has hovered at or near zero. The Office of National Statistics says the rate compared with a flat reading in June and was due to clothing prices, as there were smaller price discounts in this year's summer sales compared with a year ago. Food and fuel prices continued to drop, holding overall costs back. The figure released Tuesday means there's little pressure for the Bank of England to raise interest rates. (AP)

Greece Eases Capital Controls for Students and Payments. Greeks can now transfer up to 500 euros abroad and pay more toward tuition fees under a new easing of capital controls imposed in June. Under a ministerial decree issued in the Official Gazette, bank accounts can be opened for debt repayments, while up to 8,000 euros for student tuition and living expenses paid abroad are allowed per academic quarter. However, individuals can still withdraw only 420 euros in cash from their bank accounts a week. The country has been gradually easing the capital controls since July. (Reuters)

Currencies

Dollar Buoyed by Housing Data. The dollar rose against the euro on Tuesday, getting a lift from data showing U.S. housing starts close to an eight-year peak. The dollar index was last up 0.20% in early New York trading. The euro was last off 0.50% at $1.1025 against the dollar, which was up 0.02% against the yen at 124.40 yen after earlier hitting a session high of 124.51 yen. The British pound was boosted by stronger-than-expected inflation data for July. Sterling rose to a seven-week high of $1.5717 was last at $1.5658, or a 0.5% gain for the day. (Reuters)

Baht Slides to 6-Year Low After Bangkok Bomb Blast. The Thai baht fell on Tuesday to its weakest level in more than six years on concerns that a bomb blast in Bangkok will hurt the country's tourism. The baht lost as much as 0.5% to 35.571 per dollar, its weakest since April 2009. Foreign and local banks dumped the Thai currency, while demand disappeared, traders said. The central bank has not been spotted intervening to support the baht despite growing caution over official dollar selling, traders in Bangkok said. (Reuters)

Commodities

Oil Rises on U.S. Data. Oil prices settled up on Tuesday, with U.S. crude rallying as much as 2%, after bullish economic data and bets for lower crude stockpiles in the United States. Short-covering ahead of Thursday's expiry of the key front-month contract in U.S. crude also helped the market advance from a 6.5-year low hit on Friday. U.S. crude settled up 75 cents at $42.62 a barrel after U.S. housing starts hit a near eight-year high in July. Brent settled up 7 cents at $48.81, snapping a three-day decline. (Reuters)

Gold Falls After U.S. Data. Gold fell on Tuesday, as the dollar rebounded following upbeat U.S. housing data that supported views of a looming interest rate increase by the Federal Reserve. Spot gold was down 0.1% at $1,116.73 an ounce by 1919 GMT, after falling as much as 0.7%. U.S. gold for December delivery settled down 0.1% at $1,116.90 an ounce. Spot silver was the worst-performing precious metal, dropping as much as 4% to $14.70 an ounce, its biggest tumble since July 7. Spot palladium fell by 3.8% to $588.75 an ounce, the lowest since Aug. 4. Platinum fell 0.5% to $989 an ounce. (Reuters)