ZAR Forex Report

Beer…. The unlikely hero as the Rand marches on.

The Rand strengthened somewhat unexpectedly last week Tuesday and Wednesday, gaining as much as 2.6% against the USD to below 13.70, the most out of 31 major currencies tracked by Bloomberg, compared to the 0.1% gain in other emerging markets.

The reason for this appreciation? Beer. Beer often leads to gains – in more ways than one.

In the case of the ZAR, there is growing speculation that the out-performance is linked to Anheuser-Busch InBev SA buying local currency to pay shareholders for the $104 billion acquisition of SABMiller Plc.

It is estimated that inflows from the deal may be as high as R 100bn.

On Thursday the SA Reserve Bank left interest rates unchanged at 7% for a third straight meeting as it indicated it may be near to the end of its policy-tightening cycle – good news for home owners.

Inflation is expected to average 6.4% this year, compared with 6.6% predicted in July while growth expectations is up from 0% to a depressing 0.4%.

The Rand has gained 13% against the USD this year, after losing over 25% in 2015.

The ZAR opened at a respectable 13.59 v USD on Thurs morning, gaining for the 6th straight day.

The US Federal Reserve again held off an interest rate hike as expected and remained cryptic, mentioning that they could well hike the rate in December.

The Rand gained following the decision, appreciating to 13.38 v the USD.

As one could expect after such gains, many investors took their profits and the Rand subsequently weakened, opening the week at 13.76, having not strengthened through the big support level of 13.20 last week.

The Rand is again outperforming other emerging market currencies, ending Monday @ 13.59 and pushing stronger on Tuesday morning indicating an ever so slight affection for Hillary Clinton after the US presidential debate.

All sorts of data out this week, but look out for SA non-farm payrolls on Tuesday and the SABMiller meeting to approve ABI deal on Wednesday.

Then on Thursday and Friday, a whole string of PPI and CPI data from SA, Europe and the US.

Have a great week.

ZAR FOREX RATES

USDZAR = 13.5440
GBPZAR = 17.5621
EURZAR = 15.2238
AUDZAR = 10.3972
NZDZAR = 9.91273
CADZAR = 10.2449
CHFZAR = 13.9659

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