ZAR Forex Report

If last week was a theatre show, then Friday night would have been the grand finale starring the Rand, the leading character – bowing out to a thunderous applause…Yes, S&P did not downgrade SA’s credit rating and the ZAR strengthened to below 15 against the USD.
While there was a lot of data released last week, it was Friday afternoon that drew all the attention – US non-farm payroll figures were weak; only 38 000 new jobs were added in May compared to an expected 164 000.

What this means is that the Fed is unlikely to increase the interest rate in a few weeks – this means that global currencies benefit, as the return on investment remains better elsewhere.
Although unemployment is down to 4.7% in the States, the data failed to impress and caused the ZAR to strengthen, along with other emerging markets.

The Rand gained us much as 2.2% following the US payroll data as the market focussed on the next big announcement; Standard and Poor’s credit rating decision. S&P announced that it will keep South Africa’s investment grade unchanged, however still warned the outlook is negative.

The Rand almost immediately and instinctively strengthened and rallied a further 1.3% to as low as 15.10 versus the USD on Friday night. Friday marked the 5th straight day the ZAR strengthened – the longest period of gains since November last year.

On Monday the Rand continued this trend and broke the psychological 15 to 1 mark against the USD and dropping below 22 versus GBP and 17 versus EUR – over 5% in gains as the market still dissected the data from Friday and commodities rebounded.

One could be forgiven to be of the opinion that the ZAR has overextended itself and that gains are not sustainable…especially considering that SA business confidence is the lowest it has been since June 1993.

Early on Tuesday commodities traded higher, captained by oil which is trading at a 10 month high, and in turn boosting investor confidence. The renewed sentiment is helping emerging markets – the Rand is currently trading @ 14.83 versus the USD.

Event risk is low this week, but look out for SA mining data on Thursday, Chinese trade balance on Wednesday and Chinese new loans on Friday.

And finally, here is some food for thought: Donald Trump, with all his wealth, is worth $10bn less than if he had simply invested his inheritance in the stock market. Gives a new meaning to the phrase “trust fund kid”.

Have a great week; let’s make it rain.

ZAR FOREX RATES
USDZAR = 14.8315
GBPZAR = 21.6236
EURZAR = 16.8201
AUDZAR = 11.0426
NZDZAR = 10.3281
CADZAR = 11.6152
CHFZAR = 15.3322

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