February 19, 2024

Currency News

MyCURRENCY News | Week 8 2024

MyCURRENCY News | Week 8 2024

What we know

Overall, the rand made some gains last week as it opened the week trading at R18.972 to the dollar and closed on Friday at R18.849. These certainly weren’t linear gains, and came with a large degree of volatility throughout the week. 

Inflation figures out of the US on Tuesday drove most of the volatility as it came in higher than expected.  As has been the case for at least the past year, such bullish data is viewed as positive for the dollar and dollar-denominated assets as expectations for the timing and size of future interest rate tapering become more subdued. 

The dollar strengthened 2% (or 37 cents) against the ZAR during Tuesday’s trading, and while it continued to hold around the high of the week at R19.19/USD into Wednesday’s trading, by the close of trading on Wednesday we were in the very low 19’s.

This scenario, whereby short-term economic data out of the US remains the main driver of the ZAR, remains firmly intact.  This is seen by the fact that the USDZAR is still well within its recent trading range between R18.60 – R19.20/USD, being pushed from one end of the range to the other, in line with the bullishness or bearishness of this data.

As things stand the market does not seem to care too much about domestic drivers, as so much of this – economic woes, unemployment, crime, and load-shedding – has been well-known for many years and should be largely baked into the price of the Rand.  Indeed, it is these long-term challenges that see the ‘easy bet’ as being a long-term depreciation of the Rand, with periods of strengthening within that.

Wednesday’s budget will be the latest opportunity to see if and how these challenges may be met going forward.

What others say

BloombergMom-and-pop Investors are starting to tiptoe back into Crypto

“Retail traders are critical to crypto. They accounted for a lion’s share of revenues on Coinbase during the last bull run, and are a key revenue driver for most other crypto exchanges as well.”

The Wall Street JournalWorld’s major economies fall behind U.S.

“Economies in the U.K. and Japan shrank at the end of last year, underlining the widening gulf between robust growth in the U.S. and more anemic conditions in the rest of the world. 

The decline in activity in Japan came as a surprise to economists and meant that it has slipped in the global rankings of the world’s largest economies behind Germany and into fourth place.”

IB TimesS&P 500 hovers around 5,000, supported by improving earnings — is the market getting overvalued?

“The percentage of S&P 500 member companies reporting positive earnings surprises was above the 10-year average, though the magnitude of earnings surprises is still below the 10-year average. “This suggests that companies are generally performing better than expected, which is a positive sign for the market.”

What we think

Last week we said that “(u)ncertainty in financial markets almost always leads to choppy trading as market participants try to make heads or tails of where the next moves will take us.”

This choppiness remained evident throughout last week; however, it’s certainly possibly that this week’s data releases (unemployment on Tuesday and inflation on Wednesday) together with the budget speech will spark some life into trading and, possibly, give some indication of what the short- to medium-term direction of the ZAR may be.  

Recently as long as one has been trading on the ‘right side’ of the R18.60/USD – R19.20/USD range, then that’s been fine.  That has therefore been the guidance we have been offering to our clients.  Let’s see if this week’s events are able to shake this view up a bit.

We widen our range for the week ahead to: R18.60/USD – R19.20/USD. 

Have a great week ahead.