MyCURRENCY News | Week 21 2023

And just like that we’re all wishing we could have our comfortable R18.00/USD – R18.50/USD range back.  Indeed, just recently our own view was that it seemed more likely that we were going to break down through the bottom of that range, rather than weaken beyond the top-end.  

Unfortunately, all it took to break us out of those 3 months of relative calm was the revelation of yet another foot-in-mouth moment from government: as things stand, while we await further details regarding the arms-to-Russia scandal, the market seems to be punishing the Rand by about 5%, as we’ve settled into the R19.00/USD – R19.50/USD zone.  

It is a somewhat tense scenario at present, as the relative silence surrounding this debacle will need to be broken soon.  There must surely be some behind-the-scenes negotiations and politicking going on, as we find ourselves in the unenviable position of being stuck in the middle of the heavyweights contending The Cold War 2.0.  Something’s gotta give.

And bearing the brunt of it all, of course, are the 60 million people living in this country.  It’s hard not to feel as though we’re all attendees at the World’s largest circus, where the lights have gone out, the ringmaster left long ago and we’re just stuck watching the clowns continue with their inane performance, endlessly tripping each other up and pie-ing themselves in the face, with no concern for the consequences.  Oh, if those big hungry lions could just return for a snack!

It appears this week could bring an end to the US negotiations around their debt-ceiling, a partisan debate that seems to be becoming more frequent in the current ‘Us vs Them’ climate that has overwhelmed the country in the past decade or two.  It may be that markets have started to largely ignore the posturing around this issue; however, should a resolution lead to a USD bounce, that would of course push the USD.ZAR rate higher. 

The other big event this week arrives on Thursday with what will surely (?!) be the final domestic interest rate increase of the current hiking cycle.  Expectations are for a 0.25% increase in the repo rate to 8.00%; however, the risk here clearly lies to the upside with a 0.50% hike, given the messaging of the MPC over the past few months.  The problem in the current climate is whether this will have any positive impact on the Rand, given all the other issues we face, while it’s clear the economy will struggle further under even tighter monetary conditions.  Indeed, the worst case really would be that we see another 0.50% hike and a muted Rand response: a currency at near all-time lows, limited tools left with which to fight inflation and a continued squeezing of the domestic economy.  

Given the somber tone, we’ll refrain from mentioning load-shedding this week.  Promise. 

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