ZAR Forex Report: Enjoy the silence

After being slightly rattled by the Public Protector’s comments last week, a six month low oil price ($ 46 per barrel) and strengthening USD added to pressure on the Rand.

A lower oil price, while good for importers like SA, also means nervous markets and investors and, in turn, higher risk currencies like the ZAR weaken.

On Wednesday last week the ZAR opened at 13.11 against the USD with resistance at 13.15.

SA inflation for May came in slightly higher than in April (5.4% v 5.3%), however it still seems on a downward trend which makes an interest rate cut possible later this year.

The Rand took the Constitutional Court’s secret ballot ruling as a positive, and along with easing global pressures, caused the ZAR to drop back below 13 as the market opened on Friday.

A weakening USD meant there was room for the ZAR to strengthen as it closed the week at 14.45 and 16.48 against the EUR and the GBP.

With the northern hemisphere enjoying the summer holidays, the market is noticeably quieter and we can expect the Rand to remain range bound. This morning it opened at 12.85 against the USD and did not weaken as expected after Deputy Finance Minister Buthelezi questioned whether the SARB and its mandate is right for South Africa.

Like a broken record, it is the same old story – there is room for ZAR strength, but politics mean the currency remains on a knife’s edge. In the meantime, South Africa’s mining companies have applied to the High Court in Pretoria to block the government’s new Mining Charter – we wait and see.

Janet Yellen is due to speak tonight and we can also look forward to SA PPI on Friday and Euro inflation on Wednesday – all in all, a quiet week.

ZAR FOREX RATE

USDZAR  = 12.8664

GBPZAR  = 16.4111

EURZAR  = 14.4861

AUDZAR  = 9.79490

NZDZAR  = 9.42169

CADZAR  = 9.72848

CHFZAR  = 14.4861