August 15, 2023

Currency News

MyCURRENCY News | Week 33 2023

MyCURRENCY News | Week 33 2023

What we know

The rubber band rand is back at it again, jumping right back to where it was just over a month ago. The numbers are quite nauseating, and while it’s hard to look at – you can’t help but have a peak. We are 3% worse off from last week and 10% weaker from the lows reached at the end of July. The combination of a resurgent US Dollar as well as risk-off sentiment driving emerging markets into the gutter has left the USDZAR with nowhere to go but higher. Last month’s ZAR strength feels like it was a cheap shot, with the USD now finally retaliating and knocking the ZAR out.

US core inflation came in after easing to 4.7% vs an expected 4.8% print. This seems to reiterate the international markets stance on declining global inflationary fears – though, there are still headwinds to be navigated in the short-term. Geopolitical pressures between the US and China are keeping markets on edge and the build-up domestically to our 2024 elections could expose several chinks in the ANC’s (read government) armour. The cherry on top is our correctional services new ‘catch and release’ program when it comes ex-presidents.

Argentinian right-wing (Libertarian), Javier Milei, has come out ahead in the country’s primary elections. A shock win and a break from the current ruling coalition who are viewed as centre-left. Milei’s key campaign points can be summed up as Trumpian, “he believes climate change is a lie and plans to get rid of the central bank, ban abortion and make it easier to buy guns.” While normally, these types of events are usually back of mind, the Argentine monetary authority’s decision to devalue the currency by 20% overnight has led to contagion across all emerging market currencies, sending markets spiralling and certainly not helping the ZAR’s case.

What others say

IB TimesArgentina devalues Peso after shock primary election result

“Argentine monetary authorities on Monday devalued the peso by around 20 percent as the country reeled from the strong showing of far-right politician Javier Milei in a presidential primary election.”

News 24South Africa’s inflation outlook remains challenging

“Global inflation is cooling fast, yet central bankers are keeping a hawkish eye, as macro variables and region-specific factors continue to weigh, and core remains sticky.”

BloombergTrump indicted over attempts to overturn Georgia’s 2020 presidential vote

“Donald Trump and some of his top administration officials and associates were indicted in Atlanta over efforts to overturn the results of his 2020 election defeat in Georgia, the fourth criminal case against the former president as he campaigns for the White House.” 

Visual CapitalistVisualizing the $105 trillion world economy in one chart

“The year started with turmoil for the global economy, with financial markets rocked by the collapse of several mid-sized U.S. banks alongside persistent inflation and tightening monetary conditions in most countries. Nevertheless, some economies have proven to be resilient, and are expected to register growth from 2022.”

What we think

Last week we said that “as long as our local fundamentals remain so poor and the political climate so fraught (especially with election campaigns rapidly coming into focus) the risk of us trading above this range (R18.00/USD – R18.50/USD) should remain greater than the chance of moving under R18.00/USD.”   

Well, despite our fundamentals not having really improved, they are firmly in the back seat following the contagion out of Argentina. Political woes around the Lady R saga continue as South Africa is seen to be pushing to have ambassador Bridgety expelled from the country. Cape Town is back on its feet, but tensions are still running high as taxis continue to be (rightfully) impounded for infringements.

Some would say, just another day in South Africa.

With all this going on, we don’t expect much from the ZAR and would rather wrap ourselves in cotton wool and hope we come out the other side in one piece.

Our range for the week: R19.05/USD – R19.45/USD.

Have a great week ahead.