PP 7767/09/2011(028730)

Economic Highlights
Global
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MARKET DATELINE

11 October 2010

1 Global Finance Officials Want IMF To Calm Currency

Tensions

2 US Unemployment Rate Held Stable And Private Non-

Farm Payrolls Slowed Down In September

3 India May Act If Capital Inflows Disrupt Economy

Tracking The World Economy...

Today’s Highlight

Global Finance Officials Want IMF To Calm Currency Tensions

In view of rising currency tensions globally, the International Monetary Fund (IMF) has been tasked by global governments
to calm the recent outbreak amid signs that it is beginning to trigger a protectionist backlash. Officials including US
Treasury Secretary Timothy F. Geithner and Egyptian Finance Minister Youssef Boutros-Ghali said the IMF should outline
how countries can expand their economies without damaging those of other nations. China is accused of keeping the
renminbi undervalued to boost exports, while low interest rates in the US and other industrial nations are blamed for
propelling capital flows into emerging markets, driving up their currencies.

As a result, currency intervention has returned to the fore as countries from China to Brazil and Japan try to cap their
exchange rates from rising to maintain export competitiveness. The situation was complicated by the US Fed’s indication
of a new round of quantitative easing that has weakened the US dollar against its major trading partners.

IMF accepted the role of currency cop and said the fund would publish reports highlighting linkages between economies
as part of a systemic stability initiative. At the same time, it should deepen its work on capital flows, exchange rate
movements and the accumulation of reserves.

Nevertheless, the IMF has a weak record in recent years on pushing governments to change their policies toward trade
and exchange rates. A 2006 effort to oversee the rebalancing of the world economy has faded away and China has
repeatedly rejected the fund’s analysis.

The US Economy

Unemployment Rate Held Stable And Private Non-Farm Payrolls Slowed Down In September

◆ US unemployment rate held stable at 9.6% of total labour force in September, the same level as in August
and compared with 9.5% in June-July. Non-farm payrolls recorded a larger decline in workforce of 95,000
in September, compared with a decline of 57,000 in August. This was the fourth straight month of decline, due
mainly to a retrenchment of 159,000 jobs in government sector, on the back of a release of temporary census
workers (76,000 jobs) and retrenchment by state and local govenments (83,000 jobs). State and local governments
from New Jersey to California are firing workers to balance their budgets as declining property values and slowing
economic growth squeeze tax revenue. Exclude government agencies, the private sector created 64,000 jobs
in September, albeit smaller compared with an increase of 93,000 jobs in August. This was the ninth consecutive

Peck Boon Soon

(603) 9280 2163
Please read important disclosures at the end of this report.
bspeck@rhb.com.my

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 11 October 2010

month the non-farm private sector is creating jobs, indicating that the job market continued to improve, albeit
gradually. The slow improvement is to be expected given that the economy has just recovered from a severe
recession in 2009. The slowdown in job creation in the private sector was due to a retrenchment in the construction
sector, while manufacturing sector continue to cut jobs, albeit at a more moderate pace. The services sector, on
the other hand, recorded an increase of 86,000 jobs in September, faster than an increase of 83,000 jobs in August.
This was attributed to job creastion in trade & transport (mainly retail trade) and leisure & hospitality sectors and
a smaller retrenchment in financial services sector. These were, however, offset partially by a decline in jobs in
information sector and a slowdown in job creation in professional & business services (including temporary workers)
and education & healthcare.

Asian Economies

India May Act If Capital Inflows Disrupt Economy

◆ The Reserve Bank of India warned on 9 October that India may intervene in the foreign exchange
market if capital flows threaten to hurt the economy, after the rupee rallied to be Asia’s best performer of the past
month. The warning came after countries from Brazil to South Korea took steps to slow currency appreciation amid
rising capital flows into emerging and Asian economies. The rupee appreciated by 5.0% against the dollar in the
past month as global funds pumped a record US$21bn into Indian stocks this year on optimism about the country’s
growth prospects.

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