ZAR Forex Report

Late on Tuesday last week, the Rand gained as much as 2.8 percent as SA avoided a recession and the economy expanded by 3.3% – more than analysts predicted.

It was the biggest gain in over three months as the ZAR closed at 13.93 against the USD. GDP rose by 3.3% in the second quarter compared to a 1.2% contraction during the previous 3 months.

The gains on Tuesday paired the Rand’s 2.2% (mostly politically motivated) losses over the previous few weeks.

The ZAR currently has as much direction as the Springbok backline as it bounces around aggressively, but aimlessly. On Thursday the ECB cut growth forecasts for the Eurozone, and while it was expected, interest rates remained unchanged as the market was looking for direction from the Euro policy makers. As a result the ZAR traded wide – from 13.85s right up to 14.17s.

Local news did not provide many answers or direction either – after the positive GDP figures, the manufacturing and production data released on Thursday pointed to a slowing economy.

Hawkish comments from the Fed on Friday resulted in the USD gaining and emerging markets losing out as traders increased the likelihood that U.S. policy makers will increase rates as early as this month.

Emerging market currencies, including the Rand tumbled as commodity prices halted a four-day rally.

The ZAR closed the week at 14.45 with risks remaining high.

Interestingly, after fresh comments from the US Federal Reserve, the probability of a rate hike in September dropped from 30% on Friday to 15% on Monday. As a result, we are seeing massive swings of up to 40 cents. Markets around the world opened weaker, and the JSE is was down 2%, before recovering half the losses by close of play yesterday. The Rand strengthened to around 14.21 overnight, before opening at 14.30 on Tuesday.

Positive current account data released on Tuesday, helped the Rand strengthen even further to below the 14.30s. The current account deficit narrowed to 3.1% of GDP from 5.3% in the first quarter.

This week, look out for Eurozone CPI figures on Thursday as well as US current account data, and then US CPI figures on Friday. Global risk will continue to dominate the Rand’s direction as we expect it to remain volatile and full of nerves.

Have a great week.

ZAR FOREX RATES

USDZAR = 14.3337
GBPZAR = 19.0122
EURZAR = 16.0933
AUDZAR = 10.7978
NZDZAR = 10.5163
CADZAR = 10.9504
CHFZAR = 14.7437

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