MyCURRENCY News | Week 37 2023

There are some weeks where there really isn’t too much to write about, in the face of price action that doesn’t make too much sense.  Last week was such a week, where we saw the Rand weaken fairly significantly to as high as R19.33 vs the USD, having started the week at R18.79/USD. 

The tendency in such scenarios is to try and find a reason for the move and, while there were a few possible factors our desk was able to put forward, general consensus was that this was one of those moves where the Rand weakness was overdone in the short-term and that a recovery should be anticipated.  

There were several global factors that could have justified a somewhat weaker Rand:

• Slightly better than expected Non Farm Payroll release out of the US
• The USD strengthening throughout the week to its highest levels since March
• Continuing concerns regarding the Chinese economy
• General weakness among emerging market currencies

However, for us, the most likely cause of weakness was in fact the Labour Day holiday in the US last Monday.  When US banks are closed, activity in global currency markets tends to decline, meaning that trading liquidity is reduced.  With low volumes and large orders in one direction or the other, the moves that we see can often be exaggerated. 

Towards the end of the week we did see our view playing out, as the Rand slowly started to recoup some of its losses, recovering to R19.02/USD at one point on Friday afternoon.  That has continued this morning as we currently trade at R18.90/USD as of the time of writing. 

This week sees a fair bit of data out of the US, EU and UK, perhaps the most significant being US inflation figures on Wednesday.  With markets firmly focused on next week’s FED rate decision, any significant surprise here would see volatility spike up.   We also have the MPC make their announcement regarding SA’s interest rate next week and given our most recent inflation print we feel there is little to no chance of a domestic rate hike. 

What others say

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Bloomberg – South African inflation expectations drop for the first time in two years

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