August 12, 2024
MyCURRENCY News | Week 33 2024
What we know
Last week, while volatility spiked to levels that have been unseen since the Covid-19 Pandemic, the Rand reached a high of 18.68 to the Dollar; the weakest level that it has traded at since June this year. However, even heightened volatility was not enough to keep the Rand at the higher 18 levels and eventually the market closed at 18.31, only 10 cents weaker than where it opened at 18.21 to the Dollar.
This aggressive movement earlier in the week was likely due to a culmination of multiple drivers, such as the unwinding of the Yen-Dollar carry trade and geopolitical concerns, causing money to flow into safer assets and away from ‘riskier’ Rand-denominated assets.
It was also relatively quiet in terms of news announcements both locally and globally, and hence room was left for the market to correct throughout the week.
Considering the global interest rate cutting cycle that has started taking place, the Reserve Bank of Australia went against the grain by keeping their rates fixed at 4.35%.
What others say
Reuters – Morning Bid: Markets pray inflation stays well behaved
“Monthly CPI readings of 0.2% should prove relatively benign for the Fed too, with “core” annual consumer price inflation forecast to have ebbed slightly to 3.2%. In other words, there should be nothing to scare the horses if the number comes in on consensus – with even Fed hawks now acknowledging it’s time to ease as long as disinflation continues.”
Moneyweb – US slowdown imperils China’s path to export-driven recovery
“China’s export engine, vital for keeping the country’s growth target of around 5% within reach, is now threatened by signs of sagging US demand, just as Beijing is also struggling to jolt its own consumer economy.”
Foreign Policy – How Japan’s Yen Carry Trade Crashed Global Markets
“The global mini-crash on Monday, when stocks dived before largely recovering, can’t be pinned down to one cause alone. But one serious culprit was a long-standing foreign exchange strategy that suddenly turned into a disaster as Japan’s central bank and government tried to pull the yen out of an increasingly destructive nosedive.”
What we think
Last week we said that,“When there is a shift to risk-off sentiment, the Rand takes more of a knock than other ‘riskier’ currencies as there is a liquid market for the currency and as such it is easier to offload.”
We are expecting to see a similar occurrence throughout this coming week, as the Dollar recovered a portion of its losses last week. With no foreseeable reasons that should push the Rand stronger (in the short-term) we may see the continuation of risk-off sentiment allowing safer assets to thrive, and a weaker ZAR as a result.
A notable event to keep on your radar for this week is the US inflation figures being released on Wednesday, which could spike volatility and hint towards whether the US interest rate cut is likely to come to fruition in September. However, should inflation print higher than expected, this will bring the interest rate decision in September under some scrutiny.
Our range for the week: R18.20 – R18.85.
Have a great week ahead.