ZAR Forex Report: Halting a strengthening ZAR: Lesson one

As expected, the Fed hiked the US rate by 25 basis points and suggested there might be another hike later this year

June 20, 2017

The North Coast Courier 1 minute read

Markets were range bound going into Wednesday afternoon as attention focused to the US Federal Reserve for the rate decision.

As expected, the Fed hiked the US rate by 25 basis points and suggested there might be another hike later this year.

Weak US inflation figures, however, caused the market to doubt whether we will see another hike.

The USD weakened after the weak inflation data with emerging markets such as the Rand being the key winners. The ZAR opened Thursday at 12.63 against USD after touching 12.56 overnight – the lowest since Minister Pravin Gordhan was removed in a cabinet reshuffle.

It is important to note that much of this strength is due to USD weakness – EURZAR, as an example, still needs to break below 14.10.

The higher interest rate and in turn, stronger USD caused the ZAR to open the week slightly higher at 12.80. However the new mining charter certainly played a role as well and we saw the ZAR lose 2%. Mining stocks responded by dumping up to 10% after the release.

The Rand also lost ground against EUR and GBP; opening the week at 14.33 and 16.33.

Comments from Public Protector, Adv. Busisiwe Mkhwebane resulted in the Rand to weaken even further yesterday as it lost as much as 1.9% as she suggested the constitution should be changed to amend the primary objective of the SARB.

The ZAR pushed through 13.00 against the USD, where it is currently still trading.

Not a great deal of data to look out for this week; tomorrow we see SA’s inflation figures and US home sales released, followed by Euro consumer confidence on Thursday.