South African Rand
Set for the first weekly decline in
four, the South African rand was incrementally higher against the US dollar in
New York.
However, pressuring the underlying
currency in the intermediate term have been precious metal prices, particularly
gold and platinum. Both contracts
have remained supported but have pulled back slightly as inflationary concerns
over global inflationary pressures have abated, leaving little demand left for
both. Gold contracts on the Comex
settled slightly higher by 80 cents to just above $622 heading into the weekend
close. Fundamentally, however,
there still remains ample reasoning for demanding the underlying currency. Mainly, comments last week by Governor
Tito Mboweni have sparked bidding for the rand as the policy head reiterated the
fact that the “MPC will have the courage of its conviction to do the correct
thing even as we enter the festive period.” Blatantly suggestive of higher rates,
this would take the benchmark rate from already three year highs of 8.5 percent
as markets continue to expect another 25 basis points by the end of the year.
Combined with stalled US Fed rates,
market participants can expect carry trades to be reinitiated as more
fundamental data is expected in the coming week. Consequently, bonds markets look to
continually be under pressure as rates are expected to climb in the fourth
quarter. Separately, stock markets
were led lower on the bearish sentiment looming over metal markets. Leading issues lower were benchmark
shares in Anglo American Plc and BHP Billiton. The world’s largest mining companies were
ill-effected as copper prices declined, adding to the already woeful declines on
gold and platinum. As a result, the
FTSE/JSE Africa All Share Index was led lower for a third straight day, down
247.27 points at 23,188.80.
Mexican
Peso
Sliding on the session, the Mexican
peso continued its losing streak on a disappointing housing report and crude oil
prices that negatively affected stock prices on the day. According to US data, housing starts
dropped to the lowest in six years in the month of October. Likely to turn consumers in to hesitant
shoppers come the holiday season, traders worried about the export market pared
back in Mexican peso positions. As
it is, the US stands as one of the economy’s
biggest trade partners. Lower sales
in the US, lower growth in
Mexico. However, some reprieve may be on its way
as next week markets will see the release of the consumer inflationary report
and retail sales figures. Both are
expected to contribute to a healthy assessment of the economy with inflationary
pressures estimated to have advanced while consumer retail sales are anticipated
to have climbed a healthy 3.2 percent.
The notion should give a boost to the Mexican peso, which is quickly
approaching a key technical level in the longer term. Separately, stocks were led lower on the
session, in line with most Latin American stock markets. The benchmark Bolsa index dropped 157
points to 24,109.03, almost 0.7 percent on the day, with traders closing
positions on similar export weakness expectations. Specifically, traders worried about the
fall in crude oil contracts were estimating overvaluation of stock prices as
current crude prices hardly justify producer stock prices. Subsequently, contracts continued to
head lower on the NYMEX, printing a 17 month low.
Hong
Kong
Dollar
Oddly enough, the underlying currency
continued to depreciate despite gains in the benchmark stock index that garnered
further attention in the overnight session. For the seventh week, the Hang Seng Index
rose to another record close, the longest streak in more than three years. This time, exporter shares and airlines
continued to support the benchmark index as declining crude oil contracts are
expected to add to the competitiveness of domestic goods along with boosting
bottom lines. Cathay Pacific
Airways Ltd. advanced by 32 cents to HK$18.98, bolstering the overall market
higher by 28.64 points to close at 19,182.71. Comparatively, oil producers such as
PetroChina Co. and Cnooc Ltd. were led lower. Notably, China Life Insurance Co. shares
were supported through out the session as the nation’s biggest insurer stated
that it will receive four board positions at the Guangdong Development Bank.
Agreeing to pay 5.67 billion yuan
for a 20 percent stake, the company has officially joined the Citigroup Inc.
consortium in its current $3.1 billion bid for 86 percent of Guangdong
Development. Nonetheless, the stock
market gains weren’t able to lend the underlying currency a hand as the HKD lost
further ground rising above the key 7.7850 figure in the absence of any
pertinent economic data. In the
overnight, the composite interest rate declined by 3 basis points to 3.03
percent in the month of October from 3.06 percent. Attributed to a decline in interbank
rates, the average cost of funds for the month is still on an uptrend as the
rate has climbed by 279 points since the US tightening
cycle began.
Singapore Dollar
Plenty of strength for bullish
Singapore dollar traders on the day
even as economic data wasn’t as favorable. For the month of October, NODX rose by
3.8 percent on the annual comparison.
Although positive, the report was lower than the consensus figure which
had been anticipating an advance of 5 percent compared to the previous 8.3
percent rise in September.
Attributed to the worse than expected decline was a noticeable dip in
electronic exports, which fell 2.6 percent on the month, as disk drive exports
plummeted by 27 percent. However,
prospects continue to look good for the economy as exports are likely to pick
back up in the first half of 2007. The notion will likely couple with
recently positive reports which has lent the Singapore dollar
strength and help in continuing the hawkish bias that was issued by the MAS back
in October. Separately, according
to the report, non-electronics export in the month soared 11 percent as goods
from pharmaceuticals and pertrochemicals supported the overall positive figure.
As a result, combined with a
roaring stock market, the underlying currency was able to make gains even as the
currency undergoes consolidation.
On the day, the Straits Times index added another 14.73 points to finish
at 2,813.18. Advancing for the
fourth straight day, real estate companies led the charge with leader City Developments Ltd. rising on a report
that stated policy makers were rather uninterested in recent property
gains. Shares of the company rose
50 cents to S$12.50.
