ZAR Forex Report – Expect the unexpected, get ready to be Trumped.
The markets were jittery and very sensitive and in an almost-repeat of Brexit, not expecting the result.
At the start of play last week Wednesday, the world, and certainly the markets too, look on in awe as news broke that Donald Trump was leading the US election.
The markets were jittery and very sensitive and in an almost-repeat of Brexit, not expecting the result.
The Rand was the second most volatile currency, after the Mexican Peso and traded between 13.18 and 13.83 against the USD.
A global selloff wiped $337 billion off the value of securities as Trump’s election to the U.S. presidency ignited speculation that his spending plans would lead to a surge in inflation, which in turn would lead to the Federal Reserve to raise interest rates.
As a result, the Rand dropped by 5% – the most in five years – as emerging market assets and currencies tumbled.
Trump has promised to cut taxes and boost spending on infrastructure by as much as $500 billion.
The market was not sure what to expect with Trump’s victory and the only thing investors were right about was a depreciation in emerging market currencies.
The Dow Jones surprisingly had its best week since 2011 and closed at a record high, while gold also soared as investors flocked to safe-haven assets.
The ZAR closed the week at 14.32 to the USD while EURZAR and GBPZAR closed at 15.48 and 18.00 respectively as foreigners sold R 18bn of local equities after Trump’s victory.
The weaker Rand will see some investors betting on a rate increase as a weaker Rand will push inflation over the 6% target.
In early Tuesday trade, the markets were slightly more settled with emerging markets having its first gain in a week as the Dollar rally ended. The Rand jumped 1.2% and at the time of writing was trading below 14.20 against the USD.
The rest of the week will be fairly quiet with light data being released, but look out for UK CPI and SA unemployment today and Euro CPI and US housing stats on Thursday.
Have a great week.
ZAR FOREX RATES
USDZAR = 14.1508
GBPZAR = 17.5605
EURZAR = 15.2768
AUDZAR = 10.6978
NZDZAR = 10.0672
CADZAR = 10.4645
CHFZAR = 14.2266
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