June 30, 2022
MyCURRENCY News | Week 27 2022
What we know
Here we are again, sitting in the dark while the Rand is on a hiding to nothing. The introduction of loadshedding stage 6 in conjunction with a wildcat strike at Eskom led to the Rand losing 4% in the space of just 4 days last week. It’s all a bit nauseating to be honest, as most South Africans have no choice but to stand by and take it on the chin.
Elsewhere, the ECB Forum convened in Sintra, Portugal last week to discuss worldwide inflationary and growth fears. The most recent fears, inflation, and global growth stagnation, continue to dominate headlines as central bankers highlight how tighter fiscal policy globally will put pressure on already deflated growth prospects. This wasn’t exactly a positive result for the Rand – the USD continued to rally on the back of this and general uncertainty in the market as recessionary fears start to gain momentum.
What others say
Financial Times – Emerging markets are in better shape than you think
Compared to 2013, their current accounts have shifted from deficit into surplus, and only one in ten has a worrisome deficit — above 3 per cent of GDP — down from three in ten. Foreign exchange reserves have grown from 19 per cent of GDP to nearly 26 per cent; currencies are on average 40 per cent cheaper against the dollar than they were during the taper tantrum.
Daily Maverick – ‘No sense of national purpose’ is what is making South Africans vulnerable
In a democracy the state cannot relinquish its duty to protect citizens because this leaves a vacuum to be filled by militias, vigilantes and opportunistic forces. The July 2021 unrest also showed the police are under-resourced. “There were so many instances where people reported that the police stood back while the violence unfolded implicating them in the mayhem.
Visual Capitalist – 33 Problems with media in one chart
In times past, that media ecosystem would include various mass media outlets, from newspapers to cable TV networks. Today, the internet and social media platforms have greatly expanded the scope and reach of communication within society.
Bloomberg – Ukraine Latest: Russia tightens grip on province as city falls
Ukraine pulled its troops from Lysychansk, ceding control of a key city in the Luhansk region to Russia as President Vladimir Putin’s troops come closer to their goal of capturing the province.
What we think
Last week we said “Locally, political risk premium doesn’t appear to be priced as yet, although there are mumblings of growing concern over the domestic landscape following recent incidences. Perhaps the ongoing industrial action at Eskom over wage disputes could be a catalyst for a slight sell-off…”
The USD index (DXY) now sits above 105 points, a rather significant level as it was last seen on the index pre-9/11. While the Rand most certainly understandably remains under pressure while we try to rebuild a consistent national energy supply – it does feel like the Rand has reacted in its classic whiplash fashion. We reached as high as R16.50/USD late on Friday last week, so there appears to be some technical resistance keeping us from totally imploding.
Just like a tortoise who has suddenly been startled and hastily retreats into its shell, it will only show its head again after thoroughly analysing its surroundings before exposing itself to the outside world. So, the Rand has suddenly blown out; it will require some time in order for it to consolidate and begin the slow process of appreciating should the local and global economic conditions allow. For that, of course, we don’t have a crystal ball and will have to take it as it comes.
Our range for the week: R16.15/USD – R16.40/USD.
Have a great week ahead.