South African Rand Loses Incrementally Despite Positive GDP

South African Rand

It was a wild roller coaster ride for South African rand traders on the day, leaving the underlying currency slightly under against the US dollar.  Surprisingly the day’s loss was counter to an optimistic gross domestic product report that showed a better than expected growth rate in the third quarter.  For the quarter, gross domestic product expanded at a 4.7 percent rate while the real rate of growth jumped to 4.5 percent.  The report was above the real rate of 3.6 percent seen in the previous quarter while the annualized figure followed a revised 5.5 percent in the second quarter.  Now posting the 32^nd consecutive quarter of growth, the survey heightens the likelihood that Governor Mboweni will heavily consider rate hikes in year end action as policy makers grow increasingly concerned over the pace at which the country is expanding.  Leading the figure higher were heavy contributions from sectors including finance, real estate and business services. Separately, stocks were led lower on considerations that rate hikes were forthcoming in combination with disappointing news over the region’s biggest insurer.  The FTSE/JSE African All Share Index dropped for a second session, declining 202.79 points to 23,606.93 as shares of Old Mutual declined by 3.4 percent.  The company stated operating profit that fell short at 1.06 billion pounds in the nine months through September against the year earlier of 1.13 billion.  Citing adverse currency movements and one time charges in the US, South Africa and Sweden, the company disappointed the markets taking down other local property and casualty insurers.  Exacerbating the decline were mining stocks as gold contracts were lower in the overnight.  Although rising in the New York session, the COMEX front month contract declined by $2.10 to $645 an ounce.

Mexican Peso

Reversing four grueling sessions against the US dollar, the Mexican peso strengthened initially on the day as technical resistance has kept the currency pair in check at the 11.10 figure.  Lending to the bullish bias were comment by Chairman Ben Bernanke and crude oil contracts that continued to move higher on yesterday’s momentum.  Crude contracts in the overnight continued to advance as a forecasted cold spell and weaker dollar prompted some cautionary buying.  Speculation on increased cuts by OPEC nations exacerbated the climb as traders reinitiated positions ahead of the EIA stockpiles report tomorrow.  With crude oil higher, the Mexican peso, which has moved in tandem in recent weeks, advanced.  In addition, comments by Chairman Ben Bernanke, propped up the peso, comparatively lending to dollar weakness.  Recognizing that growth is on track to end the year as forecasted, the Chairman did admit that the current runup is likely weathering an underlying weakness purported by the housing sector.  The sentiment helped to support the pair during the New York session.  However, limiting gains on the session was clear weakness in the equity realm.  The Bolsa index declined for the second consecutive day.  Attributed to the 182.87 point drop, and subsequent close at 24,259.92, was sentiment that export growth may be hindered as a result of a slow down in the US.  In addition, concerns over a potential disruption of the swearing in of Felipe Calderon this Friday weighed in on markets amid the political distraction in the city-state of Oaxaca and will likely remain over the next couple of sessions.  Both issues are likely to keep markets relatively tight, but with a slightly bearish tint.  Separately, it has been rumored that a corporate institution has been collared by a bad spot position, helping the Mexican peso to whipsaw in the closing hours of the session.

Nordics – Swedish, Norway and Denmark

Plenty of economic data to help the Nordics on the day as Swedish retail sales leading the charge.  According to the Central Statistical Bureau, retail sales bounced in the Nordic economy, increasing by 9.3 percent in the month of October.  The figure was actually supported by a 0.8 percent monthly increase, almost double the consensus estimate.  Increases in purchases of food components added a 5.5 percent rise with durable components increasing a whopping 11.8 percent in the month.  The figure all but confirms the strength and support offered by the individual consumer, and increases the likelihood that rates will increase in December, a move widely expected by the Riksbank.  The notion was further confirmed by statements released by deputy governor Irma Rosenburg.  According to Rosenburg, the current rate of inflation is expected to be in line with the previously released October inflation report should rates be raised roughly in line with current market expectations.  The statements boosted speculation in the Norwegian and Danish Krone as well with both regional banks expected to raise rates in tandem with the Riksbank.  Subsequently, higher crude oil contracts pushed the Norwegian Krone higher even as traders become cautious ahead of the retail sales report expected in the overnight.  In addition, the market awaits the release of the Danish GDP.  Forecasted to be better than expected, the region is estimated to have grown by 3 percent in the third quarter, lending some positive bias heading into the session close.

Hong Kong Dollar

Strength was once again an intraday theme for the Hong Kong dollar as the currency gained for the fifth straight session against the US dollar counterpart.  However the underlying remains technically timid, hovering right above the 7.7750 figure and matching the spike low from the previous session.  With the bid tone, the underlying strength seems to be counter what is actually going on in the region’s capital markets as the equity benchmark dropped the most since September 12, 2001.  Plunging by 2.9 percent or 564.48 points to close at 18,639.53, the Hang Seng Index declined on a myriad of reasons.  A lower US equity index in the New York session coupled with widespread profit taking led shares lower in the overnight.  Additionally, short selling was sparked by an anticipated land auction that pitted prices extremely overvalued as per widespread sentiment.  This helped to add downward pressure on issues like Cheung Kong Holdings and Sun Hung Kai Properties as developers accounted for 17 percent of the overall benchmark’s slide.  Subsequently making headlines, Sino Land and Cheung Kong Holdings won the auction today in regards to two sites in the government’s third land auction this year.  Higher by 15 percent, the winning bids were 76 percent higher than the initial bidding price of HK$1.1 billion, leaving some investors worried that overvaluation may be in the works for the near term. 

Singapore Dollar

No economic data was slated for the day, leaving traders in looking into tomorrow’s money supply figures.  Expected to remain to the upside, the figures would be supportive of a continued hawkish bias by the Monetary Authority of Singapore, helping the currency along as it continues to consolidate just below the nine year high.  Lending to a bearish bias, keeping the currency pair barely above the 1.5500 figure, was the stock market’s performance on the day.  Falling in line with most Asian equity markets for the day, Singapore stocks subsequently fell the most in five months.  Leading the charge lower were stocks that had recently benefited from strong exports as concern mounted on the possible demand pull back in both the US and Japan.  As a result, Chartered Semiconductor Manufacturing Ltd. shares suffered with Keppel Land Ltd pacing declines on the property front.  Already rising to relatively lofty levels, Keppel shares were pummeled on the session as investors saw the recent move higher as overextended.  The Straits Times index declined by 53.13 points to close at 2,787.81.  Shockingly, twenty issues declined for every one that advanced.