South African Rand
Remaining in consolidation for the
session, the South African rand strengthened incrementally against the US
dollar, in the absence of any ZAR scheduled economic data. However, spurring the underlying
currency higher was an optimistic stock market. Boosted by a rebound in precious metal
prices, mining shares led the overall market higher to rise for the first time
in four sessions. Platinum,
notably, for immediate delivery climbed 5 percent to $1,249 an ounce in the
overnight. The increase was well
supportive of shares of Anglo Platinum, the world’s largest platinum
producer. Subsequently, stock in
the company vaulted higher by 67 rand to 809 rand. Gold shares were also boosted higher as
the commodity contract advanced by almost 1 percent on the day to $625.15. The increase supported shares of Harmony
Gold Mining Co., the world’s fifth largest producer of bullion, bringing the
benchmark FTSE/JSE Africa All Share Index to close at 23,603.55. The index advanced by 414.75 points on
the day. Ultimately, stock market
optimism lent some strength to rand bulls for the day helping the ZAR rise for
the second session, even as the overall longer term picture looks bland. Gold prices, which have recently been
moving in tandem with the South African currency, additionally bolstered
bidding. Now hovering at the 7.2300
handle, the currency’s price action continues to remain range bound, keeping the
emerging market pair between key levels of 7.2000 and 7.3000.
Mexican
Peso
The Peso weakened for the third
consecutive session ahead of key economic data that is expected within two
days. Running off of negative
sentiment from last week’s GDP constant report, the market continues to expect
that an imminent slowdown in the North American economy will be evident in this
week’s reports. The notion will
likely lead central bankers in keeping the current interest rate at 7 percent,
with a hint of rate cut lingering over the economy. The saving grace, it seems, may very
well be the consumer price index report for the bi-weekly post of November
15th. Although rising by
0.28 percent in the previous period, the report is expected to double the
assessment and rise to 0.54 percent.
The figure is likely to balance out the lower expansion figures in its
implications on monetary policy.
Furthermore, something to consider was today’s US leading
indicators report. Although widely
accepted as Dollar bullish/Peso bearish, the report lends to potential upside
for the Mexican economy. In one
word, TRADE. With exports likely to
increase on holiday spending and positive growth in the world’s largest economy
for the next 3-6 months forecasted, Mexican exporters may be thrilled. In this case, higher profits and an
export that is fashioned by 85 percent to the US, the current
momentum may last throughout till Q1 of 2007. The sentiment is likely to be shown
through third quarter growth estimates that are as high as 5.1 percent on the
year on year and add to strength for the Peso. As a result, although markets may be
down on US prospects, Mexican figures may not be too far behind come the end of
the year.
Nordics – Swedish,
Norway and Denmark
Crude oil continued to be pressured
in the New
York session, falling another 8 cents to 58.89 a barrel
as the January contract continues to remain lower on speculation. With milder weather in the North east,
traders continue to see selling pressure on the contract ahead of the end of the
year. The decline has left the
Nordics, especially the Norwegian Krone under pressure as the economy continues
to be a major provider in the market.
Coincidentally, this has left the EURNOK currency pair, one that is
highly correlated with the commodity, higher for the fourth straight session,
bouncing off of a clear support figure.
The USDNOK has now lost 5 out of 6 sessions. However, the tide could turn soon enough
as the market awaits a bullish employment report from the region. For the month of September, the
unemployment rate is expected to remain at 3.3 percent, repeating the previous
month’s release. However,
speculation continues to side with a better than expected figure, that would all
but ensure another rate hike by central bankers, a common theme among the Nordic
economies in recent quarters.
Meanwhile, Sweden is expected to be boosted by
stable producer price inflation, anticipated for later this week as a strong
surplus is estimated for the October trade balance report. Both are likely to add to mounting
speculation by a bullish Riksbank decision, lending a possible carry trade bias
for the currency. Subsequently,
Denmark is expecting the consumer
confidence indicator to lend a stabilized bias. Expectations are for a relatively repeat
in the report.
Hong
Kong
Dollar
The
Hong Kong dollar’s day was mixed as the
underlying currency failed to budge in either direction. Likely to close slightly higher against
the US dollar, the HKD was only able to move within a 30 pip range for the
overnight despite several key factors in the market. For one, stock markets fell in the
region, the most in six weeks as investment funds saw overextension in the
benchmark’s most recent advance to record levels. At the close, the Hang Seng Index
plunged 228.08 points to 18,954.63 in Hong
Kong. Stocks like China
Mobile and HSBC Holdings posted losses on the day, previously contributing to
the record jump last week. For the
record, 15 stocks fell for every two that gained on the day. Although pessimistic for the market, the
region’s currency gained on speculation of tomorrow’s consumer price index and
overall gross domestic product figures.
The region’s expansion is expected to remain lofty and optimistic, rising
2 percent for the quarter after stagnating in the previous reading. Even more positive for the economy will
be the accompanying consumer price report that is expected to stay within range
of the previous month’s 2.1 percent print.
The combination will likely spark some bias for the Asian tiger currency
as it spells a good blend of growth and low inflation. A condition that is likely to keep
policy makers from applying any restrictive or tightened policies. Nonetheless, technically, the currency
looks to remain testing the 7.7850 figure, before a directional bias can be
established.
Singapore Dollar
Strengthening for the third
consecutive session, the Singapore dollar advanced against the
US dollar as overall expansion remains positive in the Asian economy. Released in the overnight, gross
domestic product rose at a 7.2 percent rate in the third quarter, purporting an
annualized growth rate of 8.6 percent for the first nine months of the
year. A continuation of the
previous month’s 7.1 percent rate, the figure bolsters continued optimism for
the economy as momentum is likely to continue and finish out the year on the
high end. Subsequently, the release
attributed to a revision higher of sorts by the Ministry of Trade and
Industry. Previously forecasting
growth to land between 6.5 and 7 percent for the year, estimates are now higher
forecasting a 7.5 to 8 percent rate of growth for the year 2006. As a result, the Monetary Authority is
likely to keep an upward bias to current sentiment even as growth is still
expected to slow early on in 2007.
Unfortunately, the stock market wasn’t in agreement as the Straits Times
index suffered during the session.
Falling the most in four months, and in line with the Hang Seng, the
Straits index lost 41.77 points to close 1.5 percent lower at 2,771.41. Issues were hurt by similar sentiment
that earnings wouldn’t justify the recent run up in issues as traders and funds
pared back positioning ahead of a season known for runups in the benchmark
indexes. Real estate developers and
manufacturing stocks lead decliners on the day. Technically, the currency pair is likely
to establish direction in the near term as the pair continues to hover above the
support figure at 1.5550.
