South African Rand
Continuing on the overall downtrend,
the South African rand currency pair has found support at the 7.2000 handle
where bidders have propped up the USDZAR for the US session. However, positive sentiment continues to
reign over the South African rand as interest rate expectations continue to side
with at least another 25 basis points by year end. The notion depressed bond markets, where
losses were witnessed for the second straight session. Posting the first back to back losses in
approximately a month, benchmark bonds were in the red on higher speculation
that rates will continue to increase, especially after last week’s SACOB
business confidence index rose above expectations for the month. Higher business confidence spurred by
consumer spending is also likely to spur further inflation, boosting the
likelihood that rates will be raised once again by Governor Tito Mboweni and
crew. The resultant sentiment led
fixed income shares lower, although the currency additionally handled some
losses on the day. Separately,
stocks additionally were lower on the day, declining after copper prices dipped
to the lowest level in over four months.
The decline in commodity metal contracts hit shares of BHP Billiton as
shares of the world’s largest mining company dropped 7.5 rand to 135.73
rand. The individual decline
reflected a broader sell off as the FTSE/JSE Africa All Share Index lost 252.25
points to close at 23,566.96 in Johannesburg. Taking a look ahead, the economic
calendar is empty for the week in South Africa. As a result, overall longer term
sentiment looks to determine the intermediate direction as commodity prices will
play an increasingly important role in the underlying.
Mexican
Peso
Strengthening the Mexican peso on the
day was a stock market benchmark that hit record highs, joining the recent trend
of stock market advances in subsequent regions outside of the industrialized
realm. Initially taking the pair
topside to test 10.95, the market has remained bullish on the Peso heading into
the close after the Bolsa was massively supported by telecommunications and
banking shares to close 236.96 points higher at 24,188.59. Gains were capped by disappointing news
that led shares of Grupo Mexico lower during the North
American session. Miner Grupo
Mexico shares declined on the day as Mexico’s antitrust commission rejected on
Friday a planned merger between two of the companies railroad subsidiaries. It is the second time the planned merger
has been rejected by the commission even after Grupo Mexico filed for
an appeal of the court’s previous decision. Now with the transaction on hold, the
public offering expected to follow completion of the merger will likely be
placed on hold. Separately, futures
traders visibly pared back bets in the Mexican peso according to figures posted
by the Commodity Futures Trading Commission last Friday. Dropping to 58,060 net long on the week,
positive buyers have trimmed bets of an intermediate appreciation by almost 30
percent. Considered by some as a
contrary indication, the news bolstered the Mexican peso on the day in response
to improving fundamentals and ahead of the industrial production report. Tomorrow’s production is expected to
have increased again at a 4.9 percent annual rate for the month of
September.
Nordics – Swedish,
Norway and Denmark
Trading was once again narrow on the
day with no real catalyst except broader dollar strength on last week’s massive
losses. With the rate of US dollar
conversion likely to be slower than the market anticipated, traders realized the
reaction to Chinese statements as being overreactive and began to pare back
positioning. The sentiment kept all
three Nordic currencies in a tight range for the session with no economic data
released for the day. However, some
key releases are expected in the coming days, with particular emphasis being
placed on the Swedish unemployment rate in two days time and the wholesales
price picture for the Danish economy.
Wholesales prices are expected to pullback further, signaling a lower
inflationary environment while Swedish unemployment is additionally expected to
fall, suggestive of an expanding Swedish economy. Trade balance follows subsequently, for
the Norwegian economy. As a result,
US dollar fundamentals are expected to play a bigger role in the week’s action
with crude oil prices expected to weigh on the Norwegian Krone. Already falling below the $60 level,
crude contracts declined despite last week’s disappointing US stockpiles
report. With
Norway being a major exporter, the
relationship looks to keep the currency slightly pressured till
midweek.
Hong
Kong
Dollar
The Hong
Kong dollar weakened on the day, bucking three straight sessions of
strength as US dollar markets were roiled by diversification statements issued
by the People’s Bank of China. Last
week, the central bank governor, Zhou Xiaochuan, suggested diversifying out of
dollar based assets in order to capture on future returns in Japanese yen based
assets. The comments mirror similar
sentiment that was expressed by several central banks, including most recent
Russian central bank releases.
Subsequently, today’s session negativity looked to be solely based on
broader weakness as traders pared back positions on gains in light of the
Chinese yuan making another record advance on the day. The underlying EM currency pair now
hovers just below the 7.7850 resistance figure. On the equity side, stocks declined for
a second straight session as investors saw the recent rally over the past couple
of weeks as overextended. The
resultant sentiment sparked profit taking as shares were led lower by property
development companies.
Henderson Land Development Co. was set for the biggest drop in two years
after the company sold new shares into the market, potentially diluting earnings
statements in the near future.
Cnooc Ltd. stock was also led lower, leading energy stocks down, as crude
oil contracts dipped in the New
York session.
As a result, the Hang Seng index declined by 22.60 points to close at
18,868.54, additionally lending to some HKD bearishness.
Singapore Dollar
Finding support once again, the
USDSGD currency pair bounced off of the 1.5550 support level as bidders took to
the US dollar and reversed the previous four session loss. Attributed to comments by the PBoC last
week, the dollar’s gains may be capped as traders await the release of the
month’s retail sales report. Expected to advance once again, the sales
figure is estimated to have gained again for the month of September topping the
previous month’s 2.1 percent advance.
For the month, retail sales figures are expected to have gained by a
whopping 3.3 percent. The
optimistic figure should add to the underlying currency’s strength in the near
term, mounting on already optimistic scenarios given the pace of gains made in
the benchmark equity index. In the
overnight, the Straits Times index advanced 1.93 points to 2,747.24, led higher
by Singapore Exchange Ltd. With the
increased attention on local equities and the benchmark record high,
expectations are high that the operator of the region’s securities and
derivatives markets will profit enormously from the recent uptick in trading
activity. Share of the market
operator rose 10 cents to S$5.35.
