ZAR Forex Report

The positive news about Moody’s leaving South Africa’s credit rating unchanged late on Friday was quickly forgotten when, on Monday, SA’s unemployment rate jumped.

Unemployment grew by 355,000 in the last quarter.

A decline in risk appetite saw the ZAR weaken more than all the other emerging market currencies last week as manufacturing data from all corners of the world indicated weak growth.

The IMF lowered the growth outlook for Sub-Saharan Africa at roughly the same time as the European Commission lowered its outlook for the EU; As expected, the market reacted and global equities fell.

The ZAR sell off continued last week as the currency remained volatile; spiking to 15.15 against the Dollar on Thursday, before slightly recovering. Friday’s US payroll data did neither disappoint nor excite – new job numbers were less than expected, but the unemployment rate fell.

Emerging markets reacted as can be expected; remained volatile; jumping up and down like a cat on a hot tin roof before finally stabilising as Wall Street reversed earlier losses.

Moody’s decision of not downgrading SA’s credit rating – although with a warning and negative outlook – was seen as a surprise and minor victory for the Rand.

The market reacted positively on Monday and stocks, along with the Rand, opened firmer. The next big rating decision will be S&P’s rating update on 3 June 2016 which, given the latest unemployment figures, could very well not be as positive.

A slide in commodities, along with questionable leadership and priorities, saw what can only be described as shocking and worrying unemployment figures released on Monday. According to Statistics SA, unemployment increased from 24.5% in the last quarter of last year to 26.7% for the first 3 months of 2016. Simply put; the number of employed people decreased by 355,000 – these are deeply worrying figures and signals a very low or even zero growth rate.
This is not positive news and the market confirmed investors’ concerns as the Rand weakened at an aggressive rate, losing more than 2% on Monday and Tuesday to well over 22 to the GBP and 15.30 to the USD.

SA has now dropped out of the top 25 foreign direct investment destinations; a list on which it held the 11th position as recently as 2011. While we remain reasonably positive on South Africa’s future, one cannot discount the benefits of diversifying and investing in other countries and currencies.

There is little international data to take note of this week and locally, expect the news and market to remain focussed on the unemployment data.

Have a great week; may it rain.

 
ZAR FOREX RATES

USDZAR = 15.2963
GBPZAR = 22.0633
EURZAR = 17.3802
AUDZAR = 11.2206
NZDZAR = 10.2968
CADZAR = 11.7914
CHFZAR = 15.6875

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