The Rand may have begun the week trading in a fairly narrow range against the US Dollar, but the South African asset extended declines against the Pound as the British currency was boosted by a positive UK house price report.
The Rightmove data detailed a national 1 per cent increase in property values and was issued with the following statement; ‘Early activity indicators suggest a strong 2014 for the housing market. Seller and estate agent optimism is on the up.’
Last week the commodity-driven currency clawed back declines against the US Dollar following the release of disappointing US consumer confidence figures and with US markets closed for Martin Luther King Day the Rand may retain its modest gains in the hours ahead.
However, analysts are warning that South Africa’s currency still faces major headwinds, including Federal Reserve tapering speculation, the threat of strike action in the domestic mining sector and lacklustre local economic reports.
GBP/ZAR strength was enabled by comments issued by South Africa’s Finance Minister Pravin Gordhan. Pravin asserted that with the nation struggling to post growth above 2 per cent further labour unrest could take a serious toll.
Evidence that growth in China, the world’s second largest economy, is slowing also kept the Rand under pressure.
Seasonally adjusted fourth quarter GDP for China came in at 1.8 per cent, quarter on quarter, rather than the 2.0 per cent expected.
On the year growth was down from 7.8 per cent to 7.7 per cent.
In the words of Absa Capital; ‘Profit-taking and mounting local rate hike expectations help to explain why the Rand has enjoyed some reprieve in more recent days. But given the morning’s data out of China, which offered more evidence that South Africa’s largest trading partner is slowing… an extended Rand recovery could prove difficult to achieve, especially ahead of this week’s looming strike’.
On Wednesday South Africa’s inflation figures could spark Rand movement, although the GBP/ZAR pairing will also be affected by UK employment data, the publication of minutes from the latest Bank of England policy meeting and UK BBA loans for house purchase data.
As investors are betting that the Federal Reserve will trim the level of asset purchases by at least $5 billion when it meets at the end of the month, a circumstance which would lessen the appeal of emerging market assets like the Rand, US news will also be of interest.
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,17.8226 ,
Euro,,South African Rand,14.6741 ,
US Dollar,,South African Rand,10.8310 ,
Australian Dollar,,South African Rand,9.5049 ,
New Zealand Dollar,,South African Rand,9.0708 ,
Canadian Dollar,,South African Rand,9.8941 ,
[/table]
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