September 30, 2024
MyCURRENCY News | Week 40 2024
What we know
Like a weight tied to the feet of the USD.ZAR, the market experienced another 5 consecutive days of Rand strength last week, which brought it to the lows of the week on Friday at R17.07/$. The high of the week was seen in the early hours of Monday morning at R17.47 to the Dollar; however, from there, without any brakes, the ZAR moved 40 cents stronger throughout the week.
With few news announcements locally, continued positive sentiment towards South Africa continued to aid the Rand in making gains. At the same time, the Dollar remains on the back foot after some aggressive depreciation following the US interest rate cut in the week prior, which left the door open for the Rand to move stronger.
Local PPI figures were released on Thursday, showing a -0.3% Month-on-Month change, compared to the forecast of -0.2%, and a 2.8% Year-on-Year number, falling short of the 4.0% forecast. Despite the lower-than-expected PPI figures, the ZAR continued to strengthen, gaining 18 cents throughout the week following the announcement.
Another notable market-moving event last week was the Chinese stimulus package, which defied all typical currency mechanisms. Generally, stimulus and lower rates translate to a weaker currency, but the prospect of growth in Chinese markets outweighed this and pushed the Yuan stronger. The stimulus package following US interest rate cuts puts emerging markets in a ‘sweet spot’ (see Reuters article below).
What others say
Reuters – China’s new stimulus plans make a splash in global markets
“China has been an engine of growth for emerging markets near and far, sucking in especially their commodities and oil exports in boom times whenever the world’s number two economy gets a shot in the arm.”
Moneyweb – Rand could break through R15 to US dollar
“Gouws says besides further likely interest rate cuts in the US, contributing to a weaker dollar, there is also negative sentiment in America due to uncertainty around the upcoming presidential election and the country’s rising debt levels, which also weigh on the dollar. However, positive sentiment about South Africa’s growth prospects also plays a role, although to a lesser extent.”
Daily Maverick – Vice-presidential candidates set to spar in debate as Harris-Trump race is on a knife-edge
“Given the nature of their circumstances as running mates to a presidential candidate, both Walz and Vance will each be thrust into the position of defending any more problematic aspects of their respective presidential candidate’s positions or views.”
What we think
Last week we said, “…after some deliberation around the size of the cut, the Federal Reserve took a more aggressive stance and cut US interest rates by 0.5%, which brought the US benchmark rate down to 5.00%.”
The Federal Reserve has signalled for two more US interest rate cuts in 2024, and for the continuation of cuts going into 2025. According to interest rate traders, there is currently a 53% likelihood of a 0.50% cut in November, and a 47% likelihood of a 0.25% cut. While these figures are subject to change given new information, we expect additional pressure to be put on the Dollar as long as the odds are in favour of another 0.50% cut.
As the first week of the new month rolls around, markets will be looking towards the Non-Farm Payrolls announcement on Friday, which typically brings heightened volatility into the market.
From a technical standpoint, the market is closing in on the R17.00/$ big figure, and being short of local news releases this week and maintaining positive sentiment, the market could be drawn to test this level.
Our range for the week: R16.90 – R17.30
Have a great week ahead.