South African Rand
Initially gaining the most so far
this month, the South African rand has pulled back in afternoon trading
following a report that reflected optimistic improvements in manufacturing
activity for the Philadelphia region. However, gaining to an 11 week high, the
underlying currency showed continued advances as traders seem to be stepping up
their assessment of a rate cut in the US economy in early 2007, making rand
investments attractive. Currently,
rand based assets are offering an 8.5 percent interest rate compared to the
US’s 5.25 percent. Technically, the emerging market
currency pair initially broke through the 7.2000 figure before finding support
at the 7.1000 level, rising 1500 points in midday. The absence of economic data worsened
the move against the rand, following a drop in South African stocks. Led by major mining companies, the
benchmark index ended lower as gold contracts declined on the session. The FTSE/JSE Africa All Share Index lost
223.17 to 23,436.27, down by 0.9 percent intraday. Subsequently, Anglo American Plc stock
was lower, dropping 3.92 rand to 335.26 as gold and platinum contracts declined
during the session. With crude oil
prices pulling back from above the $60 a barrel market hit last week, now below
$57 a barrel, inflationary concerns have abated and reduced the need for price
increase protection through gold positioning. Contracts on the COMEX division are
lower by $2.10 at $621.70 as traders continue to pare back long positions in the
precious metal.
Mexican
Peso
The Mexican peso declined on the
session, the first in four, ahead of a report later this afternoon that could
show lower growth prospects in the Latin American economy. For the third quarter, constant
annualized gross domestic product is expected to pullback slightly from the 4.7
percent rate in the previous quarter.
The 4.5 percent consensus, surprisingly, is subsequent to an announcement
by the Economy Ministry earlier today that showed healthy foreign direct
investment in the country.
Foreign investors increased investment in to the economy by a whopping
9.5 percent for the first nine months of 2006, on an annualized basis. The increase translated into a
receivable of $14.1 billion, adding to the already expansive environment taking
place in the country. Subsequently,
prospects are still relatively high for a surprise to the upside as industrial
production figures were better than expected yesterday. Estimated to have increased by 4.9
percent, the actual advance in production was higher by 5 percent in the month
of September, bolstering further bullishness for the Peso. Separately, benchmark stocks were little
changed, but slightly higher, on the day.
The Bolsa index advanced 44 points to 24,359.58, rising to a seventh
session record high. Sentiment on
higher stock valuations should contribute to underlying currency strength and
bring the pair back below the 10.85, barring a highly negative GDP
report.
Nordics – Swedish,
Norway and
Denmark
The Nordic currencies were relatively
inactive on the day once again with US data crimping any momentum that may have
existed from yesterday’s gains. In
the overnight, both Norway
and Denmark schedules were devoid of
anything important to the markets.
Meanwhile, Sweden released continually
optimistic employment data. For the
month of October, Swedish unemployment declined further to 4.6 percent against
consensus estimates of 4.8 percent.
Boosted by rampant higher on increased expansion and production, the
lower unemployment rate should bolster speculation of further growth for the
country as wage earnings are additionally likely to move higher. The notion will likely support rate hike
increases in the near term by the Riksbank before yearend as policy makers
continue to be wary of inflationary pressures that may continue to head
north. The next indication of price
increases is set for next week when producer prices are likely to have climbed
by 3.5 percent in the month. For
the record, the jobless number declined to 211,000 from 254,000 in the same
comparative month last year.
Hong
Kong
Dollar
Equity markets helped to boost the
underlying Hong Kong dollar in the overnight as
the Hang Seng index record close was widely coupled with positive unemployment
data in lending a helping hand. For
the second day, Hong Kong’s benchmark stock
index closed at a record as shares of mainland companies continued to support
advances in the overall market.
China Mobile Ltd. shares continued to advance as China Merchants Holdings
Co. rose to the highest in six months.
Airline stocks also led the market higher with Cathay Pacific Airways
climbing for the second straight day.
As a result, the Hang Seng index added 61.07 points to close out at
19,154.07, helping to break a three day US dollar rally. Additionally on the HKD’s side was a
decline in the country’s unemployed.
For the month of October, the economy’s unemployment rate declined to 4.5
percent, a 64-month low compared to earlier consensus estimates of a 4.6 percent
print. Consequently, expansion and
continued hiring by firms have helped to fuel domestic demand, contributing to a
higher retail sales volume. Retail
sales volume was higher by 5.8 percent in the same month. Ultimately, the better than expected
unemployment figures are likely to boost speculation ahead of the consumer price
index report early next week which may fuel speculation of restrictive measures
by the monetary authority in the near term.
Singapore Dollar
Reversing the losses seen in the
previous session, the Singapore dollar made incremental
ground against the US dollar ahead of tonight’s anticipated non-oil exports
reports. Optimistic, the report
falls in line with the explosive growth being witnessed in the economy,
purporting further ground to be won by the Singapore dollar
bulls. Last month, figures stood
more than impressive as exports soared by 8.3 percent. Even more surprising was the fact that
non-electronic exports soared 17 percent higher, while trade with the
US rose for the seventh consecutive
month. Although expected to
pullback, the report should continue to advancing in the month of October,
likely purporting rising growth in the city-state’s domestic population. Subsequently, positive report results
would feed nicely in to the electronics report and the upcoming gross domestic
product report for the third quarter.
For the final print, overall growth is expected to double to 6.6 percent
against the previous 3.4 percent monthly rise. Singapore stock advances also
contributed to supporting the underlying currency, rising for the third day to a
record close. Boosted by Chartered
Semiconductor Manufacturing Ltd. shares, the Straits Times index climbed 20.83
points to 2,798.45 at the close.
Chartered, which manufactures chips that power game consoles like the
Xbox, was supported by a positive report on the manufacturing activity in the
Philadelphia
region.
