October 16, 2023

Currency News

MyCURRENCY News | Week 42 2023

MyCURRENCY News | Week 42 2023

What we know

Things are going well on the surface for SA, though, perhaps too well. I think it’s best to touch wood after that saying that as we hope there aren’t any surprises around the bend. However, reduced loadshedding continues for the majority of SA, the Bokke are through to the semifinals and the Rand (with the help of a weaker dollar) gained as much as 3.4% from the highs last week Monday. We’re now sitting at R18.90/USD this morning – the pivotal R19.00/USD level has held firm since we broke down through on Wednesday morning. What was different from our usual trading pattern last week was the relatively subdued volatility, with momentum in the rands favour repressing most USD surges.

As it is most often with the USDZAR, the recent rally by the rand has little to do with our current economic environment – the rally by the USD last week was primarily due to US 10y treasury yields climbing quite dramatically, though as they say, what goes up must come down, with that the US 10y yields reversed, and in an almost perfectly correlated manner the ZAR followed suit.

Following on from the US Non Farm payroll earlier this month, which came out almost double versus expectations, US inflation came in 0.1% higher than expected and pushes expectations firmly towards the already touted 2 interest rate hikes by the US Fed before the end of the year. 

Domestically, we have our own inflation data out on Wednesday – but inflation is expected to jump rather dramatically, at least compared to our previous prints where inflation has been at least relatively controlled with no real upward surprises. Oil and therefore fuel inflation, as well as the knock-on effect this has on food inflation are the primary drivers for our recent inflationary pressures which continue to weigh down on our economy.

What others say

Visual CapitalistWill the U.S. get hit with a recession in 2024?

“For much of the last year, recession fears have been building against a sharp rise in interest rates and market uncertainty. Only recently has there been a shift in sentiment. Given the resilience of the U.S. economy, a growing amount of investors are seeing an increasing likelihood of a soft landing.”

BloombergUS pushes to contain Israel-Hamas war, warns Iran about escalation

“The US has warned Iran in recent days through back-channel talks about the risks of escalation, White House National Security Advisor Jake Sullivan said Sunday on CBS News’s Face the Nation. He said the US couldn’t rule out Iran intervening either directly or via Hezbollah, the Lebanon-based militia group that it sponsors.”

ReutersUS tackles loopholes in curbs on AI chip exports to China

“The U.S. will take steps to prevent American chipmakers from selling semiconductors to China that circumvent government restrictions, a U.S. official said, as part of the Biden administration’s upcoming actions to block more AI chip exports.” 

What we think

Last week we said “market volatility may also be heightened as the week develops.  During such times, much of global investor focus turns to risk aversion and how current events impact the price of safer assets such as the USD and gold, as well as oil prices”.

Oil and gold prices did move significantly stronger, both up in the range of +-3.4% in the week. The US Dollar Index (DXY) did also bounce back towards the end of last week, which makes the rands resilience ever more impressive.

The ZAR’s momentum does however seem to be waning and so without more impetus, may start to peter out. Our inflation data on Wednesday will be a main event followed by US Fed members speaking that evening and Thursday evening with their comments on last week’s inflation going to be a highlight. 

Our range for the week: R18.70/USD – R19.15/USD.

Have a great week ahead.