· South African Rand Rand Boosted Early On Higher Precious Metals<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
· Mexican Peso Political Turmoil Continues To Weigh Peso Down
· Nordics Norges Bank Raises Rates, Surprises With Increased Hawkishness
· <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hong Kong Dollar Hang Seng Makes Record Level On Strength Optimism
· Singapore Dollar Low Jobless Rate Continues To Boost Singapore Prospects
South African <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Rand<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Initially keeping to the 1400 point range in the morning, the South African rand has pared back slightly to lose only 274 points against the US dollar counterpart currently trading at 7.3971. However, before the pullback, the rand rose to the highest level in six weeks as metal price mania hit the markets. The momentum was definitely felt in the stock market, adding some but little strength to the underlying currency. The FTSE/JSE Africa All Share Index added 262 points to finish at 23,600.52. Advancing for the third straight session, the market and cross market flows were supported on speculation of higher metal prices and their benefits to the overall economy. Sparked by a far less than expected trade balance figure in the previous session, belief has spread that, much like in crude oil over the past year, producers will benefit immensely along with the economy from elevated precious metals. Metal export from the region constitutes a fifth of overall out bound volume and 14 percent of global gold supply. The notion boosted stocks in BHP Billiton and Harmony Gold Mining, Africas third largest gold producer. Reaction in the commodity market was, as a result, intense with both precious metal contracts ending higher in the afternoon. Gold for spot delivery was higher by 1.4 percent at $615.30 a troy ounce with Platinum reaching to $1100. Separately, economic data spurred the morning move as manufacturing data rebounded to a 59 reading. According to the Investec purchasing managers index, new sales orders grew in the month and may lend to employment strength in the future. The report was bullish for the underlying currency as the retail sales constant added to positive sentiment. Although pulling back slightly, consumer spending remained healthy as the report rose 8.7 percent in August.
Mexican Peso
With no economic data scheduled for the session, traders reversed yesterdays peso gains with a combination of catalysts. Profit taking combined with further political pressure is adding to plenty of downside for the Mexican currency as a battle continues between protestors and the current Governor of the Mexican city-state of Oaxaca. With the local Congress urging for the resignation of Ulises Ruiz, the governor rebuffed requests and announced his intent to remain in office regardless of the current turmoil. Since May, teachers along with community groups have protested for better working conditions and pay, resulting in the sending of 4,500 federal police by President Vicente Fox. As a result, the confusion and indecision in the Peso is likely to persist in the short term now that the situation is well publicized, keeping some buyers at bay. The price action is subsequently and fully reflective of the notion as the peso has consolidated for the past week, breaking a full month of strong downward pressure in the currency pair. This will likely place some emphasis on the upcoming consumer confidence report, taking the focus off the current political situation and offering bulls some momentary reprieve.
Nordics Swedish, Norway and Denmark
The Nordics were mixed on the day with the gainers being in SEK and NOK positions as the Danish Krone lost slightly against the US dollar counter. Especially weighing on the Krone were less than expected retail sales figures for the month of September. Expected to gain by 0.2 percent, the survey dipped 0.1 percent as the previous months figure was additionally revised lower. The lackluster results ruined the mood for the Danish currency as expectations reside a little weaker now that rates may follow in the footsteps along with Riksbank and Norges Bank decisions. Both central banks are widely expected to remain hawkish going in to year end with extreme estimates pricing in another 50 basis points by the Norges at year end. Although slightly far fetched, the general consensus was right when central bankers decide to raise rates by 25 basis points this morning. Citing continued watch on inflationary pressures, policy makers raised the benchmark rate for the sixth time since June of 2005 as borrowing has skyrocketed along with a sever labor shortage. Subsequently, the sentiment is additionally riding on the back of a retail sales report that showed acceleration in spending at an 8.1 percent clip for the month of September. In order to curb any further price increases and right an increasingly spending wrong, a hawkish bias is likely the right attitude for central bankers given the current environment. However, the question remains as to the pace of increases even as figures begin to consider an aggressive 50 bps increase heading into the end of the year, keeping the Norwegian Krone underpinned. Separately, Swedish manufacturing was relatively in line with estimates, dipping to a 60.7 read against a 61 consensus. Although adding some downward pressure, the report was widely disregarded as rates are additionally expected to be aggressively tightened by Riksbank members.
Hong Kong Dollar
Trading in the Hong Kong dollar was muted on the session, even more so compared to the fact that the pace of trading is usually slow for the currency pair. Finding some support from the two session drop, the USDHKD currency pair was slightly higher in anticipation o tomorrows retail sales figures. For the month of September, the retail survey is expected to rise once again, and in line with the previous monthly report which rose by 8.3 percent. Expectations this time around are for an 8.5 percent jump. This will be the fastest pace in 5 months and spell nothing but good fortune for an economy that is pitted for further strength heading into the end of the year. Spelling more appreciation for the domestic economy, the report would nicely compliment the five year low in the jobless rate, rising property prices and a strong demand for regional equities. Hong Kong stocks advanced to a record high on shares of Chinese companies and a strengthening of the broader Yuan against the US dollar. The Hang Seng index jumped 129 points to close at 18,453.65. All in all, there is plenty of reason for the domestic currency to appreciate further as the economy is poised to run ahead on the quarterly growth rate of 5 percent.
Singapore Dollar
Sharply reversing the gains by the Singapore dollar over the past six sessions, traders began to pare back long SGD positions and profits, sending the currency pair back about 50 points on the session after dipping to the lowest level in almost nine years. Spurred by recent reports of economic growth, the Singapore dollar has shown considerable strength, recently with the release of record levels of unemployment in the Asian tiger economy. According to the Ministry of Manpower survey witnessed but a session ago, unemployment dipped to 2.7 percent in the quarter as a productive economy is churning ahead at an estimated 8 percent growth rate. Coincidentally, the reigning sentiment should add to increased strength in the near term when adding in rather stable upcoming reports on manufacturing and the electronics sector. Both surveys are expected to remain in line with previous figures. Subsequently, the sessions optimism had cross market effects as the regional stock market was bolstered by optimism that further investment would seek out Singapore on a rising spot currency pair. The Straits Times index added 36.03 points to 2,737.78 as advancing issues fully outnumbered decliners on the session. Benchmark issues were also supported as realty companies released higher expectations of future growth on earnings. Shares of Capitaland, the countrys biggest developer, increased by 30 cents to end at S$5.75 and post the biggest gain since June.
