September 04, 2023

Currency News

MyCURRENCY News | Week 36 2023

MyCURRENCY News | Week 36 2023

What we know

The USD/ZAR continues to experience significant volatility and an undesirably wide trading range. This past week saw the ZAR start off well, appreciating gently in line with a mildly weaker Dollar Index (DXY), not long after, the ZAR decoupled and went about its usual business. The swing was swift as per usual – the USD/ZAR moved from its low for the week of R18.43/USD all the way up to R18.95/USD in just over 24 hours of trading. 

The USD did briefly show some mercy in the lead up to Non Farm Payrolls (NFP) on Friday, but the move was only temporary. The NFP number came in higher than anticipated, 187K vs an expected 170K, though it was a bit of a mixed bag taking other data points into consideration. US unemployment jumped from 3.5% to 3.8%. These two seem to have canceled each other out in the end as the market tries to balance forward guidance on interest rate decisions against inflationary pressures. 

With spring day now behind us, you’d be forgiven for thinking that Eskom might see less power demand and gift us with lower stages of loadshedding. Over the weekend we were instead thrust back into stage 5 and 4-hour stints of darkness.  The other ongoing factor impacting on the domestic outlook is China’s continued growth concerns which place SA under pressure given the magnitude of materials they purchase from us and a dip in their demand directly affects us.

The only saving grace is that at least the days are getting noticeably longer, and we have the Rugby World Cup to look forward to this Friday.

What others say

IB TimesErdogan takes grain diplomacy to Putin in Sochi

“Turkish President Recep Tayyip Erdogan visits his Russian counterpart Vladimir Putin on Monday in a long-shot bid to revive a Ukrainian grain export agreement in time for the autumn harvest.”

BloombergFirst African offsets Platform begins with record 2 million credit trade

“Nations from Zimbabwe to Kenya are racing to regulate and benefit more from the trade in carbon credits from projects in Africa, enacting laws and revenue-sharing arrangements, as well as pushing for the offsets to be traded on exchanges based on the continent.”

MoneywebTransnet dagger pointed at the heart of SA’s economy

“Gordhan has directed the board to address 11 areas of key concern, including radical improvements in operational performance, identify the reasons why management staff are unable to meet performance targets, develop a system of accountability within the organisation, address excessive costs and conduct a review of executive management “with a view to establishing whether persons with the right skills are optimally utilised to deliver on the mandate.””

What we think

Last week we said that “It does feel as though the USD performance will be the main external driver this week, given the pick-up in economic releases, including GDP, Personal Income and Spending and employment figures, culminating in Non Farm Payrolls on Friday.”

SA GDP growth rate comes on Tuesday morning and expectations are for growth to have declined on both a YoY and MoM basis. SA business confidence is also sadly following suit, the previous print on the index of 27 points is expected to fall to 23. This would be a 3-year low, even worse than the 24 points in July 2020 following on from hard lockdown.

US PMI is out on Wednesday and supporting industry data following NFP from last week will also be released during the course of the week. 

The rand is at somewhat of a crossroads, sitting unnervingly in a key area that serves as a springboard to much more dizzying levels, should we break above the psychologically and technically key level of R19.00/USD, then R19.30/USD may well be on the cards. The other side of the coin is that if the USD/ZAR ends up rejecting the R19.00/USD level, it could open up the currency to momentary respite. Where exactly this would end up taking the ZAR is not very clear to us, though our feeling is that it would not be a long-lasting move without a catalyst from offshore markets.

Our range for the week: R18.45/USD – R18.98/USD.

Have a great week ahead.