South African Rand hit hard by drop in gold, SARB expected to leave rates steady next week. Turkish Lira tumbles despite hot CPI numbers as high-yielders sell off. Singapore Dollar breaks recent range, hits 5-month low. Hong Kong Dollar continues slide against Greenback.
Emerging Markets Weekly Summary - South African Rand (ZAR)
South African Rand Hit Hard By Drop In Gold, SARB Expected To Leave Rates Steady Next Week
The South African rand plummeted over the course of the week, leading USD/ZAR to break above the 200 SMA at 7.4696. The move was, in part, due to widespread pressures on high-yielding commodity currencies, a decline in gold prices, and a strike by the Congress of South African Trade Unions protesting high energy prices that shut down gold mines in the export-dependent country.
Meanwhile, South African data was also broadly weak. According to Absa Group, the country’s largest mortgage lender, house prices only rose an annual 3.2 percent in July. The index reading marks the slowest pace of growth in almost nine years, as demand for homes has been hurt by higher borrowing costs. Meanwhile, South Africa's business confidence index edged up to 92.8 in July, but this was only a mild improvement from the month prior, which represented a nearly five year low.
Looking ahead to this week, retail sales are anticiapted to remain soft, which is a natural result of restrictive monetary policy as the South African Reserve Bank has raised rates 10 times since June 2006 in an effort to fight inflation that has exceeded its 3-6 percent target for over a year. However, the central bank is not expected to hike rates again at their meeting on August 14 after SARB Governor Tito Mboweni said earlier in the week, “We have to look forward, not backward” as the Bank’s focus is “not the last inflation number published but the likely outlook for inflation.” Looking at the latest data, consumer price growth accelerated to a nearly 10-year high of 11.6 percent in June, suggesting that the SARB will be brushing off this news and may keep a neutral stance. As a result, downside risks for the South African Rand linger, though near-term trendline resistance looms above at 7.5000.
South Africa – Event Risk For The Week Ahead
USD/ZAR Technical Resistance/Support Levels
Written by Terri Belkas, Currency Analyst for DailyFX.com
E-mail: [email protected]
Turkish Lira (TRY)
Turkish Lira Tumbles Despite Hot CPI Numbers As High-Yielders Sell Off
Like many high-yielders across the forex markets, the Turkish Lira fell for much of the week as risk aversion came back into play. However, the only data on hand out of Turkey was rather bullish for the national currency. Indeed, consumer prices jumped a stronger-than-expected 0.6 percent in July, pushing the annual rate to a 4-year high of 12.1 percent. Inflation is clearly a problem, as consumer prices have grown so rapidly that the Central Bank of the Republic of Turkey dropped their formal inflation target of 4 percent and they now simply seek to bring the annual CPI rate of 10.6 percent in June down to 7.5 percent in 2009.
In the CBRT’s last policy statement, the Monetary Policy Committee said they will “consider a further measured rate hike when needed,” but that the timing depended on “developments in global markets, external demand, fiscal policy implementation, and other factors affecting the medium term inflation outlook.” The comments suggest they would prefer to take a more measured approach to raising rates, and as a result the latest inflation data may not be enough to convince the CBRT to hike rate at their next meeting on August 14.
The CBRT rate decision isn’t the only event risk on hand for next week, as industrial production is forecasted to accelerate – signaling resilient foreign demand for Turkish good, while the current account and capacity utilization are both anticipated to fall lower. However, from a technical perspective USD/TRY is likely to continue higher for a test of at least 1.1845, the point at which the gap from last week would be filled and where we have a falling trendline. Other factors to take into consideration is the general status of high-yielding currencies as well as the US dollar, especially as the trend for both of these are in favor of additional USD/TRY gains.
Turkey – Event Risk For The Week Ahead
USD/TRY Technical Resistance/Support Levels
Written by Terri Belkas, Currency Analyst for DailyFX.com
E-mail: [email protected]
Singapore Dollar (SGD)
Singapore Dollar Breaks Recent Range, Hits 5-Month Low
Upside surprises in last week’s data failed to salvage the Singapore dollar as it continued to decline against its US counterpart. The greenback mounted a spirited rally against nearly every currency, gaining 2.6% on the Sing. USDSGD broke past a downward-sloping trend line that contained price action since December 2007 and followed through to take out the recent range top at 1.3840.
The economic calendar saw a surprise improvement in business sentiment as July’s Purchasing Manager’s Index printed at 51.6, beating expectations of 49.6 and June’s reading at 50.6. The favorable result came courtesy of rising domestic demand, primarily in pharmaceuticals and transport engineering. Export orders remained below the 50 threshold level, highlighting the effects of the global slowdown on Singapore’s trading partners. This was most visible in electronics, where the sector-specific sub-index fell to 51.1. Electronics producers rely primarily on foreign markets to drive demand for their products.
Next week brings a hefty data docket, with Gross Domestic Product and Retail Sales figures on tap. The economy is expected to decline at a slower pace in the second quarter, with GDP printing at -6.3% following -6.6% in the preceding period. Retail Sales is seen dipping back into negative territory, posting an annualized reading of -2.4%. On balance, these releases are likely to take a back seat to dollar-driven buying once again. Long-term momentum indicators on the DXY dollar index appear poised to break higher having remained in oversold territory since late 2006. This suggests a long-standing dollar appreciation in the coming months.
Singapore– Event Risk For The Week Ahead
USD/SGD Technical Resistance/Support Levels
Written by Ilya Spivak, Currency Analyst for DailyFX.com
E-mail: [email protected]
Hong Kong Dollar (HKD)
Hong Kong Dollar Continues Slide Against Greenback
The Hong Kong dolar conrtinued to steadily decline throughout the week before running into resistance at the 7.8065 price level. Att hat point the pair had risin pver a 100 bps since July 22, but is still far from June’s high of 7.8117. The Hong Kong ecnomic docket provided little event risk with only forgeinn currency reserves crossing the wires. A week full of significant U.S. event risk since our last report, including Non-Farm payrolls and a Federal Reserve rate decision, didn’t inspire significant price volatilty.
The Fed decision to keep rates on hold was no surprise, although the comments from Chairman Bernanke contained more concern regarding the growth outlook for the U.S. Yet despite their dovish by nature the greenback stood firm against most major currencies. Honk Kong Dollar was the beneficiary of some risk aversion flows as AIG, the world’s biggest insurer, reported a $5.36 billion second quarter net loss. The week also saw markets closed in Hong Kong as severe tropical storms hit the country, which could impact future growth.
An empty Hong Kong calendar for the upcoming week leaves all the event risk on the dollar side. July U.S. retail sales will be the biggest market moving indicator due out on August 13, as consumer consumption is expected to increase 0.2% which would add to the bullish dollar story. However, if the impact of the government’s fiscal stimulus losses its impact, consumption could decline bringing the dollar with it. The USDHKD having surpassed the 50-Day SMA leaves 7.8090 as the next level of resistance, a break above it could see a test of 7.8200.
Hong Kong – Event Risk For The Week Ahead
USD/HKD Technical Resistance/Support Levels
Written by John Rivera, Currency Analyst for DailyFX.com
E-mail: [email protected]
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