For a fourth day the Rand declined against its major rivals as the appeal of emerging market assets was dampened by growth concerns in China, political upheaval in Turkey and the devaluation of Argentina’s domestic currency.
The Rand was also feeling the pressure as talks regarding strikes in the nation’s manufacturing sector resumed.
With workers from three of the world’s main platinum producers striking over pay, the government-driven discussions aim to reach a workable solution before South Africa’s economic prospects are too damaged by the action.
During World Economic Forum in Davos last week the South African Finance Minister Pravin Gordhan asserted; ‘The mining sector is crucial to the South African economy. Government is working very hard at mediating some of the differences between employers and labour unions’.
Of course speculation surrounding the prospect of the Federal Reserve tapering stimulus is also wearing on emerging-market assets like the Rand. With the Fed scheduled to meet this week, US developments could prove the catalyst for significant Rand movement.
The Rand is currently trading close to a five-year low against the US Dollar, a circumstance which inspired this response from currency strategist John Cairns, ‘A large number of individual negatives remains that we can hang the emerging-market selling on. Markets are losing confidence in the emerging-market universe as global monetary conditions tighten and as weaknesses in emerging markets get exposed’.
Gains in the GBP/ZAR pairing were also aided as the Pound received underlying support from the expectation that tomorrow’s UK GDP report will show that Britain continued to enjoy moderately strong expansion as 2013 drew to a close.
The UK economy is forecast to have expanded by 0.7 per cent in the final three months of last year, taking annual national growth to 1.8 per cent.
If the British growth data falls short of expectations the Rand could recover losses against Sterling over the course of Tuesday’s European session.
South African reports to watch out for in the days ahead include Wednesday’s Reserve Bank rate decision, Thursday’s producer price index and Friday’s trade balance figures.
The South African central bank is expected to leave interest rates unchanged at a 30-year low.
South African Rand (ZAR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,South African Rand,18.5102 ,
Euro,,South African Rand,15.3335 ,
US Dollar,,South African Rand,11.2080 ,
Australian Dollar,,South African Rand,9.6655 ,
New Zealand Dollar,,South African Rand,9.0877 ,
Canadian Dollar,,South African Rand,10.0457,
[/table]
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