· South African <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Rand Gold Declines Leading Rand Lower<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
· Mexican Peso Bolsa Breaks Streak, Dips In For First Time In Six
· Nordics Data Supports Healthy Expansion
· Hong Kong Dollar Hang Seng Index Breaks Another Record On China Report
· Singapore Dollar Singapore Retail Sales Disappoint, Remain Supported
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" />
Mild weakness kept the South African rand only incrementally stronger against the US dollar towards the New York close as the currency continued to rise for the second straight session. Although momentum was gathered on rather bullish statements yesterday by central bank Governor Tito Mboweni, a slight sell off in bonds helped to reign in rand gains on the day. Subsequently, with an economic calendar devoid of any reports, traders pared back some long positions in the South African major as gold prices took a tumble in the overnight. Under pressure, the precious metal contract declined in the overnight to $619.51, down from over $621 an ounce in London. Platinum was also lower, falling as much as 1.7 percent as investors moved capital to more aggressive instruments in equities. Although a correlation vaguely exists between the emerging market currency and gold, the two have moved in tandem in the short term based solely on the fact that the economy is the worlds largest exporter. As a result, lower prices are likely to crimp higher expected growth in the country. Separately, traders are focusing in on the interest rate announcement expected in more than a weeks time. With rates already higher at a record 8.5 percent, expectations are mounting of another round of tightening as inflationary pressures emerging from continued domestic strength are increasingly concerning to policy makers. The sentiment has added pressure to benchmark bonds which are higher by six basis points on the day as the note price advanced. Conversely, equities were lower on the session as precious metal miners led declines on the day. In Johannesburg, the FTSE/JSE Africa All Share Index lost 14.95 points to 23,659.44.
Mexican Peso
The Mexican peso continued to advance against the US dollar as well, going on momentum from yesterdays industrial production report. Rising by 5 percent and beating earlier consensus estimates of a slowdown to 4.9 percent, the industrial production report continues to favor healthy expansion in the North American economy. Notably, manufacturing increases were on an annualized 4.4 percent, as mining and non-oil production added a whopping 4.8 percent. The figures naturally point to an appreciating Mexican peso ahead of the gross domestic product report expected for tomorrow. Should reports continue to have a bullish tone, rising above the 4.5 percent consensus estimate, central bankers may indeed call for a bottom to recently lowered sentiment on the health of the economy, further boosting notions of stable interest rates. However, the only caveat seems to be the US economy. With declining fundamentals, the current slowdown in the US may spill over into the Mexican economy, quashing any exponential growth in the near term. This will likely keep central bankers on their toes, awaiting solid confirmation of growth in the region before making decisive direction. Stock investors seem to be against expectations, bidding the BOLSA benchmark to a record on October 13th. Comparative to the longer term, the story was different today as the index fell 70.17 points to 24,217.89, declining for the first time in six sessions. With sentiment siding with overextended valuations in shares, traders pared back positions slightly.
Nordics Swedish, Norway and Denmark
Nordic activity was narrower on the session after traders digested data earlier in the overnight. Propping up the underlying currency was the wholesale price report in Denmark. Although showing an increase in wholesale prices for the month of October, the annualized figure remained well stabilized and continues to support sentiment of another round of rate hikes, a common sentiment by all three Nordic based central banks. For the record, the report on the monthly comparison dipped 0.2 percent, less than the whole percentage point decline in the prior month. Equally bullish for the economy was the Norwegian trade balance figure. Although the actual number added to some bearishness on the session, it remains overall positive for the economy and indicative of the rising strength of the countrys consumer. For the month, exports rose a whopping 9.7 percent on the month to 66.6 billion Krone while imports additionally advanced to 39.8 billion from 34.5 billion in the prior month. Granted, the overall surplus dipped below the consensus of 27 billion for the month. However, the rise in imports shows a more supported consumer base strengthened on a tight labor market. The unemployment rate dipped to the lowest level since 1988 as employment prospects in the country have exploded. As a result, although the headline figure may suggest weakness for the EM currency, underlying strength is likely to keep interest in the Krone on the bid side. Separately, traders are anticipating the unemployment rate for Sweden later in the overnight. Printing a 4.9 percent in the previous month, the report is expected to decline to 4.8 percent, boosting notions for further rate advancement by the Riksbank.
Hong Kong Dollar
Setting the tone, traders are awaiting the unemployment report, expected to be released in the overnight. Estimates have pitted the report to decline to 4.6 percent in the month of October, falling from the 4.7 percent rate in the previous month of August. The scenario is likely to confirm further growth in the Asian tiger economy, as positive employment will boost domestic spending and fall in line with the previous Brunswick manufacturing survey. The purchasing managers index rose better than expected as overall production and manufacturing activity was bolstered in the month. Subsequently, the unemployment report should work well into the consumer price index scheduled for next week, supporting further incremental appreciation in the underlying currency. Adding to bullish sentiment, and ultimately, keeping US dollar bias to a minimum ahead o f the 7.7850 figure, was the Hang Seng index. Rising to close above the 19,000 level for the first time, the benchmark index was heavily supported following a mainland industrial production report. Although showing the slowest rate of growth in 22 months in October, the report lends to sentiment that less policy will be implemented in attempting to suppress expansion in the country. The notion helped to underpin healthy expectations in the Hong Kong economy, with bidders coming in from all ends bidding shares of property developers and China Mobile Ltd. As a result, the benchmark stock index advanced 214.58 points to 19,093.00 at the close.
Singapore Dollar
Prospects for the city-states currency narrowed on the session following a disappointing retail sales figure for the month of September. Although making an advance on the month of 1.7 percent, the release falls well short of the 3.3 percent consensus estimate expected by the market. Department store sales were higher by a whopping 7 percent. However, wider losses in auto sales suppressed any explosive gains in the report. Lending to immediate weakness in the currency, the resultant effects are likely to be temporary as the economys consumers continue to remain strong, backed by a tight labor market spurring wage advances. Subsequently, the lackluster results are likely to accompany the upcoming non-oil exports report, which is additionally expected to show a slow down. For the month of October, exports are expected to drop to an increase of 6.5 percent compared to the previous months 8.3 percent annualized rise. Separately, equities were bolstered on a release by the second biggest property company in the country. City Developments Ltd. led advancing issues after the company stated profit that almost quadrupled, lending a positive bias on real estate shares. As a result, the Straits Times index added 17.74 points to 2,777.62 at the close, rising higher to a record for the second straight day.
