August 30, 2021

Currency News

Currency News 30 August 2021

Currency News 30 August 2021

What we know


To paraphrase what Sir Isaac Newton once said, “What goes up, must come down”, and nothing could be truer of the Rand’s recent behaviour.

Preceding the Fed’s Jackson Hole Symposium, the Rand’s gains last week and the reasons for them fell outside of our local political realm and seemed to be driven by the quagmire facing the US in Afghanistan. A truly remarkable situation, where after North of $2 trillion over 20 years was spent not much has changed and if it has, will likely be reversed by the resumption of Taliban rule.

The increase in Covid-19 Delta variant cases in the US as well as globally continues to be a major threat as governments struggle to maintain stringent lockdown measures. Covid fatigue weighs heavy on the majority of the world’s population, especially the less fortunate as their limited access to laptops and other IT severely constrains their ability to work wirelessly and keep their heads above water.

In light of the continued Delta variant surge, last week’s renowned Jackson Hole FOMC meeting was shifted to an online platform and the format condensed from the usual 3 day format, therefore magnifying the event risk in the market. Many Fed members had been broadcasting their views leading up to Powell’s speech and had been very supportive of beginning the taper process – contrarily, Powell kicked the can down the road once again sighting “progress in the form of a strong employment report for July, but also the further spread of the Delta variant” and thus moving the goal posts to the 22 September meeting. Perhaps what upset the market the most was the lack of any clue as to a timeline or degree of tapering they could expect in 2021 still.

Powell’s comments saw a remarkable move in the Dollar index and EM currencies across the board, with the DXY moving roughly 0.5% weaker and the Rand gaining 1.5% in the same breath – highlighting once again the Rand’s high beta coefficient when compared to other EM currencies.


What others say


ReutersAfghanistan’s financial lifeline may lie in Qatar

Qatar is a central player in the Afghanistan crisis. Doha hosted talks between the United States and the Taliban that preceded the current mess and has been central to helping organisations secure safe passage from Kabul. There’s an argument for the tiny gas-rich emirate to get further involved by advancing funds.

IB Times Hurricane Ida shuts down oil and gas production; How will it impact oil prices?

Hurricane Ida made landfall in Louisiana on Sunday and forced the shutdown of offshore oil platforms as it churned through the Gulf of Mexico over the weekend, pushing up oil prices. But the prices, which had hit more than a three-week high in early Monday trading, pared some of those gains later in the session, lowering worries about rising pump prices. The Gulf supplies nearly a fifth of US oil demand.

Daily Maverick Hawks arrest two Twitter users allegedly linked to incitement of July looting and unrest

Law enforcement appears to be closing in on some of those responsible for orchestrating the unrest and looting that gripped KwaZulu-Natal and Gauteng in July, with two more suspected instigators arrested on Saturday. Both were arrested for allegedly using social media platforms to incite public violence.

AljazeeraSouth Africa’s unemployment rate is now highest in the world

The jobless rate rose to 34.4% in the second quarter from 32.6% in the three months through March, Statistics South Africa said Tuesday in a report released in the capital, Pretoria. The median of three economists’ estimates in a Bloomberg survey was 33.2%.


What we think


Last week’s weaker unemployment in SA seemed to go mostly unnoticed as the news cycle was dominated by offshore events – though its importance should not be ignored as we continue to try and work our way out of a rather deep rut. It seems economists continue to be wary of the knock on effects of the riots as well as a never ending 3’rd wave that appears will inevitably merge into the 4’th wave.

This week’s big data print will be on Friday when the US releases their Non-Farm Payrolls and unemployment numbers, with expectations pointing towards a softer number from last month. Taking the above into consideration, it is most likely that most USD weakness may be negated by lower consumer confidence in SA and may prevent us from continuing a much stronger rally below the R14.55 support level.

Expect the Rand to consolidate and for volatility to begin bleeding off in the next day or two while the market waits for Friday’s NFP numbers.

Our range for the week R14.55 – R14.95.


Have a great week!