South African
Momentum continued to propel the
South African rand against the US dollar heading into the weekend. As gold contracts continued to move
higher, sentiment continues to side with widening yield spreads as the South
African Reserve Bank, the country’s central bank, is expected to raise rates
another two times with in coming months.
The notion is supportive of the rand, which now sports a whopping 8.5
percent interest rate. Subsequently
gold prices add to the optimism as gold producers are likely to benefit,
boosting economic growth expectations in the economy. Gold contracts, on a rather slow day of
trading, were higher by $8.35 at $639.60 an ounce in the overnight. The advance led stocks
higher, adding to the overall bid tone, as the FTSE/JSE All Africa was higher by
133 points to finish just below the 24,000 mark. Next week’s action should build some
interest as economic data is schedule for release. This week’s absence of reports lent to
tepid price action, even as the rand made incremental advances against the US
dollar.
Mexican
Peso
Weakening for the third consecutive
session, the Mexican peso continued on the lower path as the central bank, Banco
de Mexico, kept interest rates steady at the current 7 percent. Policy makers have kept the two year low
rate for seven straight months after loosening the benchmark rate from 9.75
percent, cutting the rate nine straight times at one point. Subsequent to the decision, policy
makers noted that they will wait for inflation to enter the target range earlier
set, already taking into consideration the spike in consumer prices in the month
of October. Inflationary
suggestions on the annualized comparison accelerated to 4.3 percent in the month
on an abnormal pickup in prices of agricultural foods. The pace was the fastest since July of
last year and was considered rather temporary with growth expectations lowered
early in 2007. The slowed pace of
growth will likely keep rates of inflation lower as well as keeping central
bankers at bay with any considerations of rate hikes.
The Hong Kong Dollar gained on the
session for the third time as stocks were set for the longest streak in 3
years. In the overnight, the Hang
Seng index added 32.22 points to close at 19,294.21, set to gain 0.6 percent on
the week. Overall the index has
reached over 29 percent for the year as property and property developers have
bolstered stock prices in line with mobile telecommunication carriers. Financial services have also benefited
from foreign direct investment, supportive of stocks and the underlying
currency. However, a pullback may
be in stall for the benchmark in the near term as sentiment is rising of
overvaluation and potential disappointment in company earnings with the index at
such extreme values. Combined with
rather lackluster releases next week, the scenario remains highly
plausible. However, the momentum
behind such a move remains questionable ahead of the PMI report at the end of
the week and subsequent retail sales figures. Both are expected to be released higher
as consumers and foreign demand continue to fuel the country’s export and
consumer markets. The likelihood
would boost the currency further towards bottomside support on the technical
picture.
Gaining in the
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