Pound to South African Rand Exchange Rate extends declines while USD/ZAR stays stronger

Pound to South African Rand exchange rate chart

After advancing at the close of last week thanks to encouraging growth reports from the Eurozone and less-than-impressive US data, the Rand began local trading little-changed against its major peers.

The South African asset was weaker against the Pound however as the British asset achieved fresh highs thanks to a report showing an impressive increase in UK house prices.

The Rightmove report showed a 3.3 per cent month-on-month increase in house prices in February and a 6.9 per cent year-on-year advance.

With US markets closed for a public holiday, trading is expected to stay fairly restrained and the Rand is likely to remain range-bound against peers like the ‘Greenback’.

The Rand pushed below 11 Rand per US Dollar on Friday as US industrial/manufacturing output figures added to the recent run of disappointing reports from the world’s largest economy and reduced the ‘Greenback’s appeal.

As the Rand tracks the Euro the currency was also supported by the news that the Eurozone and its largest economies, Germany and France, recorded stronger growth than expected in the final quarter of last year.

In the opinion of the Rand Merchant Bank, ‘The primary driver [behind Rand strength] remains Dollar weakness, but what is ultimately much more important is the slow return of investor confidence in emerging markets. With no news being good news, expect the Rand to continue this stop start rally, unless we get another major emerging-market shock’.

The Rand has also adopted a more bullish relationship with commodity-driven peers like the Australian, New Zealand and Canadian Dollars.

In the days ahead the main piece of economic news for South Africa will be the nation’s inflation rate figures, due out on Wednesday.

As well as focusing on local developments investors will be paying particular attention to PMI data for the Eurozone and China. If China’s gauge shows improvement the Rand could edge higher.

Meanwhile, UK retail sales, employment and inflation figures could all have a notable impact on the GBP/ZAR exchange rate.
We forecast that upbeat UK data could help the Pound extend gains against the Rand before the weekend.