· South African Rand <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Rand Takes A Hit Along With Stocks<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
· Mexican Peso Bolsa Reaches New High, Supports Peso
· Nordics Nordics Underwater On Broader Dollar Strength
· Hong Kong Dollar Hang Seng Loses Amid Notions Of Overextended Benchmark
· Singapore Dollar Singapore Dollar Declines Ahead Of Promising Retail Sales Report
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" />
Continuing on the overall downtrend, the South African rand currency pair has found support at the 7.2000 handle where bidders have propped up the USDZAR for the US session. However, positive sentiment continues to reign over the South African rand as interest rate expectations continue to side with at least another 25 basis points by year end. The notion depressed bond markets, where losses were witnessed for the second straight session. Posting the first back to back losses in approximately a month, benchmark bonds were in the red on higher speculation that rates will continue to increase, especially after last weeks SACOB business confidence index rose above expectations for the month. Higher business confidence spurred by consumer spending is also likely to spur further inflation, boosting the likelihood that rates will be raised once again by Governor Tito Mboweni and crew. The resultant sentiment led fixed income shares lower, although the currency additionally handled some losses on the day. Separately, stocks additionally were lower on the day, declining after copper prices dipped to the lowest level in over four months. The decline in commodity metal contracts hit shares of BHP Billiton as shares of the worlds largest mining company dropped 7.5 rand to 135.73 rand. The individual decline reflected a broader sell off as the FTSE/JSE Africa All Share Index lost 252.25 points to close at 23,566.96 in Johannesburg. Taking a look ahead, the economic calendar is empty for the week in South Africa. As a result, overall longer term sentiment looks to determine the intermediate direction as commodity prices will play an increasingly important role in the underlying.
Mexican Peso
Strengthening the Mexican peso on the day was a stock market benchmark that hit record highs, joining the recent trend of stock market advances in subsequent regions outside of the industrialized realm. Initially taking the pair topside to test 10.95, the market has remained bullish on the Peso heading into the close after the Bolsa was massively supported by telecommunications and banking shares to close 236.96 points higher at 24,188.59. Gains were capped by disappointing news that led shares of Grupo Mexico lower during the North American session. Miner Grupo Mexico shares declined on the day as Mexicos antitrust commission rejected on Friday a planned merger between two of the companies railroad subsidiaries. It is the second time the planned merger has been rejected by the commission even after Grupo Mexico filed for an appeal of the courts previous decision. Now with the transaction on hold, the public offering expected to follow completion of the merger will likely be placed on hold. Separately, futures traders visibly pared back bets in the Mexican peso according to figures posted by the Commodity Futures Trading Commission last Friday. Dropping to 58,060 net long on the week, positive buyers have trimmed bets of an intermediate appreciation by almost 30 percent. Considered by some as a contrary indication, the news bolstered the Mexican peso on the day in response to improving fundamentals and ahead of the industrial production report. Tomorrows production is expected to have increased again at a 4.9 percent annual rate for the month of September.
Nordics Swedish, Norway and Denmark
Trading was once again narrow on the day with no real catalyst except broader dollar strength on last weeks massive losses. With the rate of US dollar conversion likely to be slower than the market anticipated, traders realized the reaction to Chinese statements as being overreactive and began to pare back positioning. The sentiment kept all three Nordic currencies in a tight range for the session with no economic data released for the day. However, some key releases are expected in the coming days, with particular emphasis being placed on the Swedish unemployment rate in two days time and the wholesales price picture for the Danish economy. Wholesales prices are expected to pullback further, signaling a lower inflationary environment while Swedish unemployment is additionally expected to fall, suggestive of an expanding Swedish economy. Trade balance follows subsequently, for the Norwegian economy. As a result, US dollar fundamentals are expected to play a bigger role in the weeks action with crude oil prices expected to weigh on the Norwegian Krone. Already falling below the $60 level, crude contracts declined despite last weeks disappointing US stockpiles report. With Norway being a major exporter, the relationship looks to keep the currency slightly pressured till midweek.
Hong Kong Dollar
The Hong Kong dollar weakened on the day, bucking three straight sessions of strength as US dollar markets were roiled by diversification statements issued by the Peoples Bank of China. Last week, the central bank governor, Zhou Xiaochuan, suggested diversifying out of dollar based assets in order to capture on future returns in Japanese yen based assets. The comments mirror similar sentiment that was expressed by several central banks, including most recent Russian central bank releases. Subsequently, todays session negativity looked to be solely based on broader weakness as traders pared back positions on gains in light of the Chinese yuan making another record advance on the day. The underlying EM currency pair now hovers just below the 7.7850 resistance figure. On the equity side, stocks declined for a second straight session as investors saw the recent rally over the past couple of weeks as overextended. The resultant sentiment sparked profit taking as shares were led lower by property development companies. Henderson Land Development Co. was set for the biggest drop in two years after the company sold new shares into the market, potentially diluting earnings statements in the near future. Cnooc Ltd. stock was also led lower, leading energy stocks down, as crude oil contracts dipped in the New York session. As a result, the Hang Seng index declined by 22.60 points to close at 18,868.54, additionally lending to some HKD bearishness.
Singapore Dollar
Finding support once again, the USDSGD currency pair bounced off of the 1.5550 support level as bidders took to the US dollar and reversed the previous four session loss. Attributed to comments by the PBoC last week, the dollars gains may be capped as traders await the release of the months retail sales report. Expected to advance once again, the sales figure is estimated to have gained again for the month of September topping the previous months 2.1 percent advance. For the month, retail sales figures are expected to have gained by a whopping 3.3 percent. The optimistic figure should add to the underlying currencys strength in the near term, mounting on already optimistic scenarios given the pace of gains made in the benchmark equity index. In the overnight, the Straits Times index advanced 1.93 points to 2,747.24, led higher by Singapore Exchange Ltd. With the increased attention on local equities and the benchmark record high, expectations are high that the operator of the regions securities and derivatives markets will profit enormously from the recent uptick in trading activity. Share of the market operator rose 10 cents to S$5.35.
