South African Rand
A weakened stock market and concerns
over a bearish assessment over the current account deficit by the central bank
weighed heavily on the rand.
Dropping from a two month high, the South African currency suffered as
speculation remained pre-emptive ahead of the Reserve Bank of
South
Africa’s bi-annual monetary policy review. In the report, expectations are high for
negative mention of a shortfall that now represents 6.1 percent of GDP and is
the widest in 25 years.
Consequently, the wider gap is likely to erode at overall expansion in
the economy, jeopardizing interest rate expectations, leading the currency
lower. Stocks additionally
suppressed gains with the benchmark FTSE/JSE Africa All Share Index dropping
below the record 24,000 close yesterday.
Leading shares lower were declines in BHP Billiton and Anglo American
Plc. The world’s biggest mining
companies took a hit on the day following a drop in copper contract prices as
gold and platinum contracts declined in the overnight session. Gold contracts now stand $9.40 lower at
$618.30 while platinum prices have dropped $30.30 to $1,162 an ounce. All contracts aside, little action has
been witnessed aside from the cross market capital flow. Economic data will be presented tomorrow
in the form of manufacturing production, however, which should spark some
speculative action in the currency makrets. Manufacturing production in the month of
September is expected to have tapered off on a non-seasonal basis. Although detrimental to the underlying
currency, the overall figure still remains well supported and will likely add to
further speculation of higher interest rates. For the record, production is expected
to rise to 3.5 percent, lower than the previous month’s 4.2 percent
advance.
Mexican
Peso
The Mexican peso was slightly lower
on the day, while still remaining within the trading range that has kept the
currency in lockdown for the past week. With no economic data, the peso remained
under pressure following increased patrolling in Mexico City following the explosions that
roiled the city a couple of nights ago.
Stepping up security around government buildings and financial
institutions, officials have recognized the intent for another round of attacks
vowed by the responsible party. In
an interview, coalition leaders vowed to strike businesses and government
buildings, following through on promises to fight the government till occupation
in Oaxaca was
relieved. Although the length of
time required is unknown, the increase in security will likely be in place till
shortly after December 1st, when President-elect Calderon takes
office. Separately, on the economic
front, Mexico deputy central bank Governor
Guillermo Guemez stated that the recent surge in inflation was likely temporary,
as price increases are likely to decline heading early into next year. Rising to 4.09 percent in the month of
September, prices are expected to drop below 4 percent as early as December,
making central bank decision a lot clearer cut. Speculation had mounted, slightly, on a
possible rate hike next year as recent expansion would likely contribute to
consumer inflationary pressures.
The comments are preceding the consumer price figures set for release
tomorrow for the month of October. According to the consensus, prices are
expected to move higher by 4.4 percent on the year.
Nordics – Swedish,
Norway and Denmark
The Norwegian Krone was the only
currency of the three to gain against the US dollar in relatively narrow trading
today. Spurring Norwegian bullish
sentiment was additional employment data for the third quarter. Supplementing the overall national rate
released by a week ago, the unemployment rate dipped to 3.3 percent. This backs the more accepted fall to 2.2
percent seen on November 2nd. Record setting, the report continues to
purport further central bank rate increases as labor wages are surely to
increase wage costs figures and consumer spending. Employment suggestions were also released
in Sweden in the overnight. According to a survey by the Swedbank AB
and the Federation of Private
Enterprise, employment in smaller Swedish companies are restrained as a shortage
of qualified workers is visibly present in the European economy. Survey results rose to the highest
market since 2000 as rising expansion has supported optimism of further sales
and orders and spells good news for further rate hikes by the Riksbank. Currently at 2.75 percent, markets are
beginning to price in an aggressive move by the central before year end as
inflation remains on the topic of central banker themes. The sentiment is likely to feed into
this week’s releases of consumer price inflation, available in all three Nordic
economies. Subsequently, a
confirmed increase in all three reports is likely to lend further strength
against the dollar as it all but confirms higher rates in the very near
term.
Hong
Kong
Dollar
Gains in the USDHKD currency pair
were capped during the session after an earlier onslaught by Dollar bulls pushed
the pair through the 7.7860 figure to the session high. With no economic data on schedule, price
action seemed to be dictated by further declining momentum early on with little
cross market surprise in the equity market. Pulling back from previously historic
highs, the Hang Seng index retreated, dropping 128.07 points to 18,811.24. Leading the move lower was Hang Lung
Properties Ltd. The stock had the
biggest drop in eight years as properties developers came into focus, with the
decline being exacerbated by shares in China Mobile. The index’s best performer in the past
month, China Mobile shares moved lower on expectations that current market
valuations would likely top out in the near term. Subsequently, activity is likely to be
thin and slow in the next couple of days, ahead of the US trade balance
data set for release tomorrow.
Should the shortfall widen once again to a record against
China, bullish sentiment is likely to
be beneficial to HKD positioning.
Separately, the International Monetary Fund maintained its support for
the Hong Kong dollar trading band, stating that
the currency has moved quite well in the currently instituted band. The world organization also reiterated
its growth forecast for the economy which is expected to expand between 5.5 and
6 percent in the year.
Singapore Dollar
Continuing on yesterday’s momentum,
the Singapore dollar rose against the US
dollar counter in the overnight session. There was little news on the front for
further appreciation except for automobile COE open bid reports. All three categories rose on the month
boosting the notion, albeit far reaching at best, that consumer sentiment is
rising and increasing the bids for automobile licenses. However, with the 1.5600 handle proving
to be a formidable support barrier for the currency pair at the current moment,
SGD bulls will likely need further evidence of expansion in the country to make
a push past the figure. The
evidence will more than likely not be served till next week when retail sales
figure for the month of September are to be released. Expected to remain at a healthy 2.1
percent annualized figure, the strength in the consumer sector should
additionally be reflected in the subsequent gross domestic product figure which
is expected to show a whopping 8 percent rate of expansion in the third quarter.
All in all, market sentiment should
still side with an appreciate Singapore dollar and hawkishly biased
Monetary Authority. Subsequently,
the Straits Times index dipped from record territory as investors saw market
valuations as slightly overextended. Leading shares lower were developers like
CapitaLand Ltd.. The equity
benchmark as a result, dipped 13.92 points to close at
2,735.30.
