Fri. Aug 23rd, 2019

The Rand reverses gains

This week saw the Rand reverse its gains from the previous week as both local economic factors and international trade woes weighed down the currency.

the rand reverses gains 1024x683 - The Rand reverses gains

This Rand report is brought to you by Sable International

The Rand continued its gains on Tuesday, breaking below the R17.22 mark against the Pound. This was mainly a continuation of the “risk-on” sentiment, which major markets such as the US experienced in previous weeks.

Local economic data released last week Tuesday revealed that unemployment levels were at its highest since 2003. Earnings data from Eskom also reported a R20.7 billion loss for the year to date. These factors weighed heavily on the Rand.

42726fdd randreport - The Rand reverses gains

The Rand traded
within a tight range during the latter part of Tuesday and most of Wednesday.
On Thursday, the Rand weakened, and broke the R17.47 mark against the Pound and
continued to lose ground against both the Pound and Dollar. It closed at around
R14.49 to the greenback after opening at around R14.37 on Thursday.

This trend
continued for the rest of the week as risk sentiment on emerging markets
weakened. The risk-averse sentiment was mainly driven by the US-China trade war.
The economic effects impacted demand for raw materials such as iron and oil
(dragging the prices of these commodities down). Emerging markets dependent on
strong commodity prices are feeling the pinch, and South Africa is no
exception.

The stronger Dollar
also weighed against the Rand during the latter part of the week. This after
the US Federal Reserve cut rates for the first time in 10 years. The Fed then
later dispelled expectation of another rate cut later in the year, which
further dampened risk appetite for emerging market assets.

Market
event calendar

Wednesday 7
August

  • South Africa Foreign Exchange Reserves:
    An indicator of the Reserve Bank’s ability to bolster the Rand against major
    currencies.

Thursday 8
August

  • China Trade Balance: Reveals
    China’s demand for imported goods from its trading partners.
  • South Africa Production Data
    (mining, gold and manufacturing): An increase will indicate the medium-term
    strength of the South African economy.

Friday 9
August

  • UK GDP Data: A higher GDP will point to a stronger Pound (all else remaining equal) in the short term.

-Justin Fortuin

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