On Sunday we saw what analysts called the “the most important oil meeting of the last three decades” between major oil producers take place in Qatar.
The mission: To discuss a potential production freeze.
The outcome: Failure. Oil prices fell on Monday, bringing down emerging markets with them and reversing the Rand’s gains from the previous week.
Last week Wednesday we saw positive Chinese trade data (Increase in Chinese Exports) which helped global markets, as we saw on Wall Street and other indexes move to their highest levels this year. Emerging markets improved along with risk appetite, especially the Brazilian Real (President’s impeachment and renewed optimism) and ZAR as local sentiment was positive along with a rise in commodity prices.
The Rand broke the key levels of 14.62 and later 14.50 against the Dollar.
This renewed optimism has seen huge inflows of capital into SA last week as foreigners bought local bonds at the fastest pace in six years, which helped ZAR appreciate to 14.44 against the USD – USD/ZAR has fought back 13% from its January high. It is important to note that this is not all Rand strength, but also Dollar weakness.
After oil gained 6% two weeks ago, it collapsed on Monday morning as producers failed to reach an agreement on freezing production.
In what should be a positive (lower petrol prices), the fact is that the lower Brent oil price has investors nervous which causes commodities and commodity based currencies to drop.
Fortunately the discontent did not last long; today (Tuesday) Brent bounced back to $43 per barrel, pulling Wall Street to within 2% of its all-time high and causing higher risk, higher yielding currencies to rise. The ZAR is trading at pre-Nenegate levels of 14.38 against the USD.
Another interesting point, we have mentioned before the similarities in Brazil and our own political risk.
On Sunday evening the Brazilian lower house of Congress voted in favour of President Rousseff’s impeachment; bringing hope of a potential change in government. Investors and the market responded positively as the Real appreciated by 1.5% and stocks jumped.
This week we see SA inflation figures released on Wednesday and the ECB press conference and main refinancing rate on Thursday.
ZAR FOREX RATES
13:23 pm (UCT+2 Time)
USDZAR = 14.2848
GBPZAR = 20.5130
EURZAR = 16.1870
AUDZAR = 11.1324
NZDZAR = 10.0469
CADZAR = 11.2360
CHFZAR 14.8160
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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