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Monday, September30th 2013

 Week:

Commodity Currencies (AUD/NZD/CAD) Sentiment: Negative

 After three consecutive bull sessions commodity currencies declined sharply against greenback in this week. To start the week Aussie Canadian and New Zealand dollar spiked up against USdollar after the release of better than expected Chinese data on Monday. HSBC Chinesemanufacturing activity grew robustly in the month of September. Upbeat PMI data from china isclearly giving an indication that recovery in second biggest economy in the world is gainingmomentum. However all three commodity currencies ended the week on negative note with Aussie declining almost 150pips while the Canadian and New Zealand dollar declined almost100pips and 160pips respectively.

 Australian dollar started the week on positive note after the release of better than expected PMI

data from China which is also Australia’s biggest trading partner. HSBC manufacturing PMI inSeptember improved to 51.2 against the expectation of 50.09. Aussie traded up to 0.9456 levels but it was unable to sustain the gains and it declined to 0.9296 levels against US dollar andended the week at 0.9311 levels. The taper talk is still not over in US as FOMC member Bullardin his statement made it clear that fed could start reduction in its bond purchase program fromas early as October. The main take away from his speech was QE taper before this year end is stillon the table. That resulted in heavy losses in Australian dollar and other currencies againstgreenback. Last week there were no major data releases from Australia but this week the focus will shift to Reserve Bank of Australia, RBA kept the cash rate unchanged in its Septembermeeting however after delay in QE taper by fed Australian dollar has rallied almost 500pips thismonth. RBA officials still continue to believe that Aussie is high and therefore Reserve bank of 

 Australia might surprise the markets by cutting its cash rate from a record low of 2.5percent inits upcoming meeting on next Tuesday to restrict the rise in local currency. Although recenteconomic release from Australia has been mostly negative with current account, retail sales andemployment numbers all missing the market expectations. But one more rate cut is still expectedif not this month for November. Any changes in tone of the Reserve Bank of Australia’sstatement and surprise in trade balance data might result higher volatility in Australian dollar.Traders will also be keeping a keen eye on US debt ceiling and budget related issues next week asprobabilities of US government shutdown are rising now as the deadline for the budget deal is onMonday. But US government might agree to a last minute deal that can drive the rally in USdollar against all its major counterparts.

Canadian dollar also declined this week against greenback and ended the Friday’s session at

1.0304 after making a high of 1.0342 earlier in the week. Canadian dollar traded in a very thinrange against its major counterparts. Loonie as Canadian dollar is known started the week onpositive note after the release of positive retail sales numbers, retail sales m/m data came in line with expectations at 0.6 percent while the core retail sales m/m came better than marketexpectations at 1.0 percent easing previous months decline rise in retail sales was mainly due to3.2 percent growth in sales of gasoline, Canadian dollar also benefited from upbeat PMInumbers from China. However the gains in Canadian dollar were limited as concern on US debtceiling continues to grow higher. US government reaches it debt ceiling limit in October. If thecongress doesn’t raise the borrowing limit the US government won’t be able pay all its bills.Congress needs to pass the funding bill first to keep the government operating after 1 st October when its new financial year starts. ssssss

The New Zealand dollar given back its last week gains against greenback. Last week Kiwi gain

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almost 1 percent against its US counterpart after Fed surprise markets by not reducing its $85 billion bond purchase program. However New Zealand dollar reversed its gains this week andended the week at 0.8279 levels against US dollar. New Zealand dollar declined sharply onTuesday as Fonterra country’s largest dairy firm said earnings in the second half of the year will be significantly lower. New Zealand is on of the worlds largest dairy products exporters andFonterra is New Zealand biggest dairy company. Weaker than expected data from New Zealandalso drove the Kiwi down against greenback as New Zealand printed its biggest trade deficitsince 2008 September at -1191M against the expectation of -722 M. the main reason for widertrade deficit was decline in milk exports that and number of other food scandals such as exportsof rotten apples to China which also New Zealand’s biggest trading partner. Impact of this is not just negative for New Zealand’s biggest industry of food production but also for New Zealanddollar. Next week focus will remain on economic and political developments in US. Uncertainty over when Fed will begin the QE taper and concern over the possible shut down of USgovernment will impact the currency markets.

This Week Key Events/Developments:

Monday: NZD, Building consents m/m, ANZ business confidence AUD, private sector creditm/m, MI inflation Gauge, CAD, GDP m/m, RMPI m/m; Tuesday:  AUD, AIG manufacturingindex, Retail sales m/m, Cash Rate, commodity prices y/y;  Wednesday: NZD, ANZ commodity 

prices m//, AUD, Buildings approvals m/m , Trade balance; Thursday : AUD, AIG services Index ,CAD, Ivey PMI

 Please contact your Mecklai advisor to best understand how the information and analysis contained in this document should be used, given your

specific exposures. If you do not have an existing advisor please write to info@mecklai.com  to set up the relationship.

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