April 17, 2023

Currency News

MyCURRENCY News | Week 16 2023

MyCURRENCY News | Week 16 2023

What we know

The last two months’ trade in the Rand has followed a fairly predictable pattern of oscillating between 18.00 and 18.50 against the USD.  In fact, since 15 February we have only closed outside of that range on 8 days, evenly split above and below the limits.  The most predictable move was immediately following the MPC decision to hike our interest rates by a greater than expected 0.50%, which saw us trade as low as 17.70 – alas, those gains proved to be short-lived.

Outside of that move the main driver of short-term volatility continues to be US data releases, while each time the Rand drifts weaker, it feels part of the continuing decline in local sentiment in the face of the never-ending loadshedding saga. 

Last week saw us give up 2% in thin trade on Monday in a move largely attributed to soft economic data out of China, before reversing this move as the USD sold-off following lower than expected inflation.  By the time the market had fully digested the data, the USD was trading at its weakest level in a year against its trade-weighted basket. Indeed, it does feel as though the USD may be facing a move lower shortly, having repeatedly found support at current levels so far this year.  Any sign of sustained slowing economic activity could very well be the catalyst for such a sell-off.  Having said that, we’ve seen many false starts of late, so caution against being too optimistic in this regard. 

Focusing on local issues, it’s hard not to give “broken record” commentary every week.  As always, the record that’s not quite playing is Eskom’s Greatest (Mis)hits and this week we’re stuck on track 6 or 8, we’re not quite sure.  Either way, whether it’s stage 6 or stage 8, the ongoing strain on the economy and sentiment remains.  Indeed, South African bulls are dropping like flies as it becomes increasingly difficult not to despair at the current situation.  With this backdrop and no end in sight, one feels that domestic drivers can only continue to push the Rand weaker, all else being equal.

What others say

Daily MaverickDon’t fight with the Fed; accept there will be policy uncertainty – SA Reserve Bank governor

“Ever since the Global Financial Crisis (GFC) in 2008, it’s felt like the fate of the world has rested in the hands of the central banks — and now they are coming under increasing criticism for potentially overplaying their hand and putting the global economy at risk.”

ReutersUkraine seeks re-opening of grain transit via Poland as ‘first step’

“Kyiv will aim to secure the re-opening of food and grain transit via Poland as “a first step” at talks in Warsaw on Monday, Ukraine’s agriculture minister said, after Poland and Hungary announced bans on some imports from Ukraine.”

Visual CapitalistWhat are PGMs and why does the Automotive Industry need them?

“Platinum group metals (PGMs) are a category of metals that include platinum, palladium, rhodium, ruthenium, osmium, and iridium. Around 80% of PGM production in 2020, was situated in challenging geographical locations like South Africa and Russia.” 

What we think

Last week we said that “…we hope the move into R18.50/USD territory was a short-term correction and that we will find our feet again – however, the main event risk lies with the US CPI release on Wednesday afternoon as well as the FOMC minutes that follow that evening.”

While US data this week is of a distinctly second tier nature, we do have GDP numbers out of China, as well as fair number of UK economic releases.  Locally, the most important data out will be the inflation figure on Wednesday, and we hope to see a muted number as our economy continues to struggle with the added pressure of the 4.25% of rate hikes in under 18 months. 

The only positive we can find at the moment is that the recent sell-offs in the Rand have resulted in lower highs against the USD, suggesting there may be some resistance to a significant slide in our currency.  

As such our range for the week: R18.00/USD – R18.40/USD.

Have a great week ahead.