Posts from — September 2006

Riots broke out in Hungary after an audio clip surfaced of Prime Minister Ferenc Gyurcsany saying how the government lied about the state of the economy to help him be re-elected. Hungarians trying to be part of the European Union and adapt the Euro needs to have below a 3% of GDP deficit to qualify, where it is currently forecasted to be 10.1% this year. To do this there are increases and social security payments and the sales tax increased from 15% to 20%. Worried that this may cause unwanted inflation and weaken the Forint, the Hungarian central bank (NBH) raised interest rates by 50 basis points to 7.75%. Calyon expects another 50 basis point hike in October.

Portfolio.hu Article
RTE Article

South Africa’s current account deficit number came in at a deficit of 6.1% of GDP in the second quarter of 2006. Although it is contracting, as last quarter was 6.4%, the bigger picture is still bearish for the South African rand.

With a slowing growth environment, investors will generally put countries with current account deficits out-of-favor. In South Africa, data shows that foreign investment will most likely not be enough to cover the deficit by the end of the year. Additionality, with South Africa being the leading gold producer and having a currency tied to commodity prices, the downward pressure on commodities does not bode well for the rand.  The chart to the right shows the rand against the dollar over the last forty-five days. 

A military coup invaded Bangkok with tanks, and soldiers seized radio and television stations. Prime Minister Thaksin Shinawatra declared a “severe state of emergency” via Channel 9 out of New York as the rebellion called for his resignation. The Thai Baht dropped a hard 2% against the Dollar in less than 2 hours.

The chart portrayed shows the Thai Baht plotted against the US Dollar over the past three months.

CTV Article

The Reserve Bank of New Zealand keeps rates unchanged at 7.25% but Allan Bollard say “we are less confident that no further policy tightening will be required in this cycle”. The chart shown is the AUD/NZD plunging over the last five days from 1.1867 to 1.1365. The New Zealand Dollar also rallied against the United States Dollar and the Japanese Yen.

The chart to the right shows the last year of price action for the EUR/NOK. With oil prices tumbling and Norway being a key exporter of oil, the change shows through in the strength of the Norwegian Krone. Another primary concern is the central bank rate for Norway. Prices actually declined in the month of August meaning that the year-on-year inflation level fell from .6% to .4%, below the consensus of .6-.7%. With inflation being a key ingredient for rate hike reasoning, this news does not bode well for increasing rates.

EUR/NOK = 8.382 at time of post

The Gulf Cooperation Council (GCC), an alliance between nations around the Persian Gulf, talks of having a single currency for the region. Criteria for admission has yet to be decided on before plans can be ratified. The criteria being discussed are similiar to the criteria for the Euro, such as certain levels of inflation, government deficit, interest rates, and foreign currency reservces. Large decisions still have to be made before major changes happen such as where the central bank will be, but the goal is to have a monetary union by 2010.

More information:
Peninsula Article
Another Peninsula Article
Arab Online Article