August 01, 2023

Currency News

MyCURRENCY News | Week 31 2023

MyCURRENCY News | Week 31 2023

What we know

The Rand did a sterling job of outperforming the rest of the EM basket last week, though the short-term rally has finally lost its legs. Last week saw riskier assets appreciate against the US Dollar and then consolidate, while the ZAR continued to press lower against the USD, outperforming EM currencies by about 2% on average. After reaching as low as R17.42/USD on Thursday last week, the Rand has given up these gains in one fowl swoop with us now trading above the R18.00/USD level again.

The US Fed did end up raising interest rates by the expected 0.25% which added a little bit of volatility to the market as traders tried to decipher Powell’s statement. The US Dollar Index (DXY) pushed higher to 102.1 index points following the news, though still quite far away from this year’s previous highs of 105.8 index points in March. We don’t really want to see those levels anytime soon as, all things remaining equal, that would see the Rand trading closer to R18.75/USD.

What others say

BloombergGlobal demand for coal is bringing mayhem to South African towns

“Elephants escaping from the nearby Kruger National Park often caused the biggest commotion in Komatipoort. These days residents check their CCTV cameras on their phones at barbecues on the weekend. The congestion created opportunities for criminals who saw drivers stranded in the queue for days on end as easy targets after nightfall. Robberies, theft and assaults spread from the highway to the town. Road accidents increased.”

Visual CapitalistThe top performing S&P 500 sectors over the business cycle

“The business cycle fluctuates over time, from the highs of an expansion to the lows of a recession, and each phase impacts the performance of S&P 500 sectors differently. And though affected sectors have different levels of average performance, any given period may see the outperformance of certain sectors due to external factors, such as technological advancements or high-impact global events (i.e. global pandemics, international conflicts, etc.)”

Daily MaverickLong road to impeachment: Mkhwebane is guilty as charged – here’s a breakdown of the damning findings

“Section 197 multiparty committee members, minus the EFF, the UDM and ATM, finalised deliberations on Sunday and agreed with an earlier opinion by an independent panel that there is enough prima facie evidence of misconduct and incompetence.”

What we think

Last week we said that “Monday, however, saw the correlation between a weaker USD and stronger ZAR decouple as the USD appreciated, with the ZAR holding its own and even managing to make headway and retest towards a key level of R17.70/USD. This defiant run stronger by the ZAR does start to raise questions about its short-term prospects, as it seems to be entering overbought territory in our opinion.”

When the USDZAR went as low as R17.42/USD last week, it was the first time that we had been that low since early February. There has been a lot that has happened since February, with most of it not being very positive for the ZAR. Despite the deluge of problematic news events to have plagued our country over the course of the year, there still seems to be a candle flickering at the end of the tunnel. Maybe it’s just the die-hard optimism of a South African who doesn’t know any better – but there seems to be a general positive sentiment around the ZAR at present. A lot of this is owed to the market’s forward guidance on inflation and interest rates alike, with us hopefully having reached the peak of inflation. We don’t suddenly expect the ZAR to retest previous lows, that would be naïve – we would however like to see the USDZAR consolidate in a channel around the R18.00/USD level and take guidance from the next news events.

We have the BoE’s interest rate decision on Thursday with them most likely to mimic the US Fed’s 0.25% hike. This is then followed by the usual favourite on Friday at 14:30, the US Non Farm Payroll, which will again give insight into the labour market and the effect previous interest hikes have had.

Our range for the week: R17.80/USD – R18.25/USD.

Have a great week ahead.