ZAR Forex Report

“We’re all in the gutter, but some of us are looking at the stars.” Oscar Wilde had it spot on with his infamous words and this was evident in the wonderful rollercoaster ride known as the South African Rand.

The ZAR has strengthened to four month highs against the USD as “confidence” returned to the markets…”

At the time of writing the ZAR is strengthening for its third straight day as a successful Eurobond sale and a $ 380 m offer from Associated British Foods Plc to buy a 49 percent stake in Illovo Sugar Ltd is boosting investor confidence, despite a potential ratings downgrade. If you hold Illovo Sugar stocks, then you will know that shares jumped as much as 18 percent!

The Rand was helped by an increase in Chinese inflation which sent Asian equities up, China also reported the first rise in factory gate prices since 2013, adding to optimism that the economy is moving forward.

USD losses are expected to continue as G20 leaders came to the conclusion that the Dollar is too strong and it would be good for the global economy if it weakens; the Dollar is now reaching key supporting levels, also against the ZAR, so it will be interesting to see how it plays out over the next few weeks.

Last week oil rose as much as 6% – this is important for emerging markets such as SA as it increases demand for riskier assets. While on the topic of emerging markets, it would do one good to take notice of what is happening in Brazil – after news that their controversial (corrupt?) and socialist president, Dilma Rousseff, was urged closer to the door, Brazilian stocks jumped more than 3%.
Perhaps some similarities exist in our local situation? Will we see the ZAR strengthen quicker than a plane with 20 pieces of luggage can reach Dubai? Only time will tell.

The drought keeps taking its toll and this is very noticeable, even in your grocer – the SA Finance Ministry has now approved a wheat import tax to protect local farmers, meaning that even bread will cost 10% more…inflation is set to keep increasing, and with it, the interest rate.

Other than the political risk factor and drought, the ZAR seems in a relatively good place – long may it continue.

There is not much local data out this week, however look out for the UK interest rate decision and US and UK inflation data on Thursday.

ZAR FOREX RATES
10:39 am (UCT+2 Time)

USDZAR = 14.6570
GBPZAR = 20.9612
EURZAR = 16.7834
AUDZAR = 11.2374
NZDZAR = 10.1060

Every week on Tuesday North Coast Courier will post a ZAR Forex/Currency report “supplied by Exchange4Free”, a proudly local based foreign exchange company and currently employ 25 local residents – and growing.

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