Emerging Markets - Platinum Bids Bolsters Rand Buying

South African Rand

Strengthening for the second straight session, the USDZAR currency pair ticked further below the 7.4000 figure on higher commodity prices, with specific emphasis on climbing platinum prices.  Gold contracts weren’t able to contribute to the positive undertone as contracts on the COMEX division of the New York Mercantile Exchange were lower on the day by $1.30 at $627.90 a troy ounce before the close.  Comparatively, platinum prices were higher in the morning, hitting a session high of $1219.50 before paring back in afternoon trading.  Additionally boosting the underlying currency was further speculation that yields in South African denominated assets would outpace US dollar based investments in the near future. With the Federal Reserve on hiatus from the recent spate of tightening, traders in the market are focusing on higher rates of return especially in South Africa as the country’s central bank now offers 8.5 percent compared to a 5.25 percent in the world’s largest economy.  Subsequently, raising rates three times since June, Reserve Bank of South Africa Governor Tito Mboweni has noted that upside risk continues to persist on the potential for a rebound in crude oil contracts.  Confirming statements last week have spurred speculation that further rates hikes will likely be instituted in keeping inflationary pressures in check.  However, stocks weren’t affected by rate speculation as miners and commodity producers led the charge on the FTSE/JSE Africa All Share Index.  Rising by a whopping 360.42, the index advanced to a record to close at 23,950.99, now above 30 percent since the beginning of the year.  Sector stocks like Impala Platinum and Anglo Platinum lead commodity stocks with both issues rising higher, boosting sentiment for the underlying currency.  This will all lead into the SACOB business confidence figure for release tomorrow.  Expected to still remain expansionary, the confidence survey is estimated to continue its decline on fear of higher interest rates denting overall corporate profits.  Last month, the South Africa Chamber of Business survey declined to 97 from a previous 99 as higher interest continued to suppress confidence.  The lower figure should provide for some intraday selling, a potential opportunity for bids on dips.    

Mexican Peso

Another sharp reversal took place in the Mexican Peso today following a set of explosions that rocked Mexico City.  Although damaging, the bombs were quickly dismissed by investors as they seemed only to be planted in an attempt to make a statement rather than cause harm.  Destroying a bank branch, the bombs additionally damaged the country’s federal election court and headquarters of the Institutional Revolutionary Party.  Nonetheless, the explosions sparked concern over the environment that President-elect Felipe Calderon will take over on December 1^st, calling to question his ability to fully govern the country.  Subsequently, the morning’s debacle adds to current tensions in the city state of Oaxaca which have purported clashes between police and protestors over the called for resignation of the region’s governor.  The Mexican peso lost on the day, as a result, versus the US dollar, spiking above the 10.85 figure before paring back below heading into the afternoon close.  Stocks were not as ill-effected following the blasts once the situation was deemed as more of a statement than terrorism.  The Mexican Bolsa index advanced at the close by 437.67 points to 23,607.54.  Equities remain higher by over 30 percent on the year as emerging markets continue to attract foreign investment. 

Nordics – Swedish, Norway and Denmark

Unusually narrow, the Nordics were calm on the day as traders awaited economic data from all three economies.  More recently, the market is expecting Norwegian PMI survey results this evening, which is estimated to remain well supported as the economy continues to bolster record unemployment, boosting spending, and upticks in manufacturing on increased orders.  As a result, expectations remain high of a rise on the previous report, showing a print of 63.8 in the month of September.  However, optimism maybe cut well short as expectations loom of a pullback in overall industrial production.  Non-seasonally, the measure is estimated to have fallen from a 6.1 percent year on year rate to a more tamed 4 percent.  The results should counter the PMI figure, adding to some NOK concerns.  Subsequently, the sentiment should disseminate into the industrial orders and production figures in Denmark.  However, potential remains for both to rise on the month over month as economic fundamentals have boosted previous sentiment of a temporary pullback in production.  Positive results should give boost to the currency, reversing the decline of 2.4 percent in August.  Separately, budget data is slated for the Swedish economy, not likely to move markets in the overnight.

Hong Kong Dollar

Considerably lower than the closing price on Friday, the Hong Kong dollar dropped against the US dollar in line with a flurry of major Asian currencies on the day that declined.  Traders paring back bets on a rate cut in the US squared some positioning in the basket of currencies monitored by the People’s Bank of China.  Including the yen and South Korean won, the selling pressure leaked into the Hong Kong dollar market, sending the USDHKD currency pair higher above the 7.7800 figure.  No economic data was visibly protecting the currency during the session with the only positive notions coming from the benchmark stock market.  For the fourth straight session, the benchmark Hang Seng advanced to its fourth straight record close.  Boosted by stocks in China Mobile Ltd. and banking sector stocks, the index rose another 186.86 points to 18,936.55, its highest mark on record.  With increases in bidding for Asian based assets the market continues to have a lot of momentum behind it heading into the end of the year.  Taking a look ahead to tomorrow’s release, fundamental traders are set to see the foreign currency reserves report.  Expected to widen again, the $130.3 billion figure is likely to do little for the underlying currency.

Singapore Dollar