South African Rand
The South African Rand advanced on
the US dollar in the overnight, unrelenting on the advantage throughout the
New York
session. After hitting a high of
7.2630, the currency pair has pared back on Rand bullishness, currently trading at 7.1550 in afternoon
trading ahead of the close. The
pickup in South African rand bidding widely occurred despite a report by the
National Association of Automobile Manufacturers of South Africa that indicated
slower than expected growth in automobile sales. Indicative of consumer sentiment, the
survey reported sales that slowed to an annual 9.6 percent rate in the month
following a 14 percent spike in October.
Vehicle sales declined to 55,734 last month as the total figure was
estimated to have fallen below the total 565,018 record in 2005. Subsequently, recent interest rate hikes
were attributed to the decline in the figure, as the central bank raised rates
three times since June in order to curb consumer spending and inflationary
pressures. The higher rates of
interest seem to be working and is likely adding to some wallet squeezing,
making more durable oriented goods unavailable to consumers in the country. However, policy officials are expected
to retain a hawkish bias, raising interest rates again by 50 basis points when
they meet later this month. On a
good note, auto exports out of the country surged a whopping 28 percent in the
first 11 months as the decline in the domestic rand has raised the
competitiveness of South African based auto products.
Mexican
Peso
A calm silence came over the Mexican
Peso in the overnight as bidders were supportive of the underlying
currency. With President Calderon
sworn into office on Friday, and the grappling struggles between the incumbent’s
party and opposition now laid to rest, bidding is on the anticipation that
improvement is on the way. However,
with a majority of the cabinet already announced, some inherent concern is
residing with the fact that cabinet members may once again be out of touch with
citizens of the country. Coupled
with the resiliency of left wing candidate Obrador’s efforts to interfere with a
peaceful term, the underlying concern may in fact add some downward pressure
overall even as the US dollar’s prospects are tepid at best. As a result, stability of the current
environment may be the only thing lending some further bullishness to the
underlying Mexican peso heading into the New Year. The effects can already be seen as
optimists in equity markets continued to buoy the benchmark stock market in the
country. Although valuations have
been rising for some time, the benchmark index rose on early efforts on the part
of Calderon starting with today’s announcement of a pay cut. In the midst of vowing to spend more on
construction in order to spur job growth, President Calderon also stated
intentions to cut cabinet pay by 10 percent and work to streamline spending in
order to ramp up gross domestic product.
A mighty gesture by the newly elected, the statements may linger from
some time, adding to the strength of the Peso in the near
term.
Nordics – Swedish,
Norway and Denmark
Reversing previous strength, the
Scandinavian currencies lost some ground against the US dollar in the New York session powered
by profit taking from the previous string of winning sessions. Notably, the Norwegian Krone found
resistance at the 6.1000 figure after falling 8 daily sessions out of 9 as
US economic weakness continued to
contribute to the move. In
addition, boosting the Nordic currencies higher, and likely to add further
support in the near term, was a rebound in crude oil contracts. Settling slightly below the pre-weekend
close, crude oil continued to be boosted during the New York session
following rising speculation that supply may once again be cut. Already set for December
14th, the OPEC “members only“ meeting is likely to produce a another
round of cuts on supply as a global slowdown and rising stockpiles have made
some crude players nervous about the future of accrued petro profits. Either way, the supported oil figure
lends some strength to the underlying pairs of the Nordic region, countering the
bid tone set by profit taking heading into the Asian session. Countries in the region, especially
Norway, benefit as a portion of gross
domestic product is derived from oil revenues. Subsequently, the only economic data
that was released on the day had little to with economic healthy as the Danish
November Foreign Currency Reserves report was released. Rising by 600 million kroner to 180.2
billion kroner in the month of November, the report increase was seen after the
central bank purchased foreign currency worth 300 million kroner. The transaction as largely to offset a
previously accepted lone, in line with regular cash spot transactions.
Singapore Dollar
Rising on the session, monetary
intervention was absent on the day as the underlying SGD gained against dollar
strength that peaked at 1.5470 in the overnight. Attempting to test the 1.5500
significant resistance level, the currency pair failed to break higher, falling
on Singapore strength before finding
consolidation respite at the 1.5400 figure. Helping to get things started in the
Asian session was an optimistic manufacturing report released by the Singapore
Institute of Purchasing and Materials Management. According to the institute’s survey,
manufacturing growth increased for the second straight month as orders by
foreign trade partners increased, leading to higher production by domestic
factories. For the month of
November, the index results rose 1.2 points to 54.6, the highest in
approximately two and a half years.
Subsequently, the electronics component of activity additionally
increased by 1.9 points to 56.3 as manufacturers saw a considerable gain in
electronic orders from foreign counterparts. The notion boosted export order growth
which accelerated in November, rising 1 full point to 54.1. Ultimately, the results help to boost
the Singapore dollar’s case for further
strength heading into the New Year.
With retail sales healthy, manufacturing supported and growth well
forecasted at an impressive 8 percent, the hawkish bias is likely to continue to
loom over the economy and help to support positive bidding for the currency in
the near term. However, a heavy
consideration remains of central bank diversification which will likely limit
any momentous appreciation in the near term.
