September 21, 2021
MyCURRENCY News | Week 38
What we know
It has been one-way traffic for the Rand since last week. The Rand has given up half of its recent gains after appreciating from R15.40/USD all the way down to R14.06 in just 3 weeks. We now find ourselves edging closer to the ominous R15.00/USD level. As we have seen before, when EM currencies start to come under pressure and their fortunes start to turn, the Rand will move with the EM basket and swing the hardest leaving traders with a bad case of whiplash.
The ever increasing disconnect between international investors and our domestic political theatrics is rather encouraging. Until recently and under Zuma’s administration, the Rand was capable of explosive movements based solely on the whiff of a rumour. Whereas under Ramaphosa, movements are more measured (relatively) and responses to political news far more subtle. The distinct decline in SA’s risk premium and the move towards our perceived fair value on the Rand is a welcome development. A great example of the above would be the market’s almost blatant disregard of news releases concerning Zuma’s latest ploy in declaring a ‘constitutional dictatorship’ – a lackluster attempt to subvert the Constitutional Court’s legitimacy.
What others say
Timeslive – Zuma fit to stand trial, say state medical experts
This is according to the latest affidavit filed by advocate Billy Downer, who is leading the prosecution team in the arms deal trial in which Zuma and French arms company Thales are facing a myriad of charges.
Reuters – Pfizer/BioNTech say data show COVID-19 vaccine safe and protective in kids
Pfizer Inc (PFE.N) and BioNTech SE said on Monday their COVID-19 vaccine induced a robust immune response in 5 to 11 year olds, and they plan to ask for regulatory authorization as soon as possible to use the shot in children in that age range in the United States, Europe and elsewhere.
Bloomberg – Evergrande tumbles further after S&P says default is likely
China Evergrande Group slid deeper in equity and credit markets Tuesday, fueling concerns about broader contagion after S&P Global Ratings said the developer is on the brink of default.
What we think
This short trading week given Heritage Day this Friday leads us to expect rather choppy trading patterns as liquidity starts to dry up with the masses heading to their preferred seaside getaway. Contagion fears loom as the Evergrande debacle continues to unwind in China, this along with the approaching Fed meet are the driving factors this week with some US and EU PMI data out on Thursday.
Markets seems to be bracing themselves for tomorrows Fed meeting as it becomes increasingly inevitable they will start to pave the way for the taper tantrum. Last months Fed meeting was an upset as the market clearly expected guidance on how the Fed would proceed with a reduction in their stimulus efforts. This saw the Rand rally on broad USD weakness leading into September. If the Fed plays coy once more and does not offer insight to their plans leading into the final chapter of 2021, we expect swift punishment and another resultant surge by the Rand.
Our range for the week: 14.45 – 14.95.
Have a great week!