November 21, 2022

Currency News

MyCURRENCY News | Week 47 2022

MyCURRENCY News | Week 47 2022

What we know

Relative to the price action we’ve seen over the past while, last week was uneventful.  The Rand held onto its recent gains against the USD, trading largely in a 17.20 – 17.40 range.  However, as the recent rally has been largely in response to a USD sell-off, we did weaken slightly against both the GBP and EUR, briefly moving above GBP 20.75 and EUR 18.00, before recovering somewhat. 

Data this week is largely second tier and with the Thanksgiving holiday on Thursday, we expect at least the second half of the week to be very quiet.  As such the focus will very much be local, with the MPC expected to raise rates by another 0.75% on Thursday, which would see the Prime Rate up to 10.50%.  This announcement, together with the inflation number due on Wednesday, will allow market participants and economists to start determining their inflation and rate paths for 2023 and one gets the feeling that the local economy really does need these two metrics to show signs of having peaked.    

Unfortunately the rhetoric around Eskom has once again taken another negative turn: no money -> no diesel -> no power.  Even taking into account how accustomed we have become to load shedding, forewarnings of “extreme levels of load shedding not yet experienced in SA” do bring a new level of anxiety into the situation.  The expectation is now that we will see Stage 5 commence this week and the outlook over the next few months is bleak indeed.

What others say

TFI GlobalRussia’s final clamp down on US Dollar

It is only the US that enjoys an edge due to its control of the US Dollar. But using the dollar as a weapon is now going to backfire. As the US can’t get enough of sanctioning other nations, the countries are now seeking to curb their dependence on the dollar. And hence the world is now entering the era of de-dollarisation.

White Coat InvestorPicking the opposite of what Jim Cramer does

In times like these when, thanks to social media, you can yell at the world’s richest people and troll those who hold the most power, why not take the musings of one of the most well-known (and most mocked) stockpickers and then use it as evidence for why you probably shouldn’t be listening to him in the first place. That’s what the person behind the popular @CramerTracker Twitter account has done, and it’s the reason why an ETF has been created that allows you to do the exact opposite of what famed analyst Jim Cramer says you should do.

Daily MaverickWhat the world is learning from South Africa’s nascent Just Energy Transition Investment Plan

One of the reasons that South Africa is recognised as a leader in its moves towards a just energy transition is because of the multistakeholder consultative process that saw the drafting of a Just Transition Framework.

What we think

Last week we wrote that “…we are hopeful that we’ve perhaps seen the froth being removed permanently from the bullish USD rally” and that “…although a 7% drop from the highs is significant, the Dollar remains strong at current levels, up 12% on the year and still around 20-year-highs.”

So it was that last week’s Rand trading took its cue from the greenback.  The USD index (DXY) settled into the 106 – 108 range, albeit with some overshoot last Tuesday that pushed it as low as 105.3, which in turn sent the Rand to its best levels at 17.10.  In the absence of major drivers the Rand is as correlated to the S&P as anything else and most afternoons and evenings saw the currency move in lockstep with US equity markets. 

Where it seems we did err last week was in writing that “…the Eskom situation seems at least stable for now and given the potential impact this may have on the currency, we take a neutral short-term outlook here”.  We humbly ask that we be allowed to change this outlook!  We have to believe that should it become clear that Stages 5, 6, or worse are going to become the norm over the coming months, the Rand will simply have to retreat.

Our range for the week: R17.25/USD – R17.65/USD.

Have a great week ahead.