ZAR Forex Report

Frustratingly, again the Rand’s weakness is purely self-inflicted as it lost over 4% last week before reversing some of the losses.

While there is no legal reason why Minister Pravin Gordhan will have to leave his office after the soft charges laid against him last week, the move is seen as purely political.

The President now has the opportunity to take action against the Finance Minister and remove him from his position – therein lies the risk.

Investors, the market and thus the Rand are not blind to this and as a result the ZAR weakened significantly last week, plunging by 3.9% to 14.43 against the USD on Tuesday – the most since June.

In what seemed more like confusion than backtracking, the NPA made a statement on Wednesday saying that they are willing to review the decision to prosecute Pravin.

Much of the previous day’s losses were reversed as the Rand gained back as much as 2.5% against the USD.

One cannot help but think that there are some informed individuals with privileged information putting in a few trades and playing the markets in these times of turmoil.

Conspiracy theories aside, foreign investors certainly were rattled by the politics as they dumped over R 3bn bonds on Wednesday and R 14.3bn last week.

Weak Chinese trade data added further pressure on the Rand and other emerging market currencies.

It is worth noting that despite all the soap opera styled drama costing the country billions, it seems as though the market has not yet priced in a credit ratings cut in December.

S&P has called the political turmoil a game changer, but noted that SA could still stick to its fiscal targets set in the budget in February this year.

After comments from US Federal Reserve Chair, Janet Yellen, the Dollar rocketed to a seven month high.

A rate hike in the US in December is now priced at 70%, adding pressure on the ZAR and other higher yielding currencies.

USDZAR opened at 14.32 at the start of the week, EURZAR at 15.75 and GBPZAR at 17.41 as the ZAR became the most volatile currency tracked by Bloomberg.

The Rand and other emerging-market currencies strengthened late on Monday and early Tuesday trade for the most in three weeks as the dollar dropped after mixed U.S. economic data was released.

As a result the Rand had a good run, opening at 14.08 against the USD this morning. While no significant news will be released today, the Rand is heading towards the key level of 14.00.

Not much local news this week (bar politics), but SA inflation figures are out on Wednesday.

Also keep an eye out for UK inflation today and ECB rate decision on Thursday.

Have a great week.

ZAR FOREX RATES

USDZAR = 14.0603
GBPZAR = 17.2025
EURZAR = 15.4846
AUDZAR = 10.7968
NZDZAR = 10.1159
CADZAR = 10.7580
CHFZAR = 14.2272

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