Pound to South African Rand (GBP/ZAR) strengthens as risk aversion impacts emerging market currencies

Pound to South African Rand exchange rate chart

The Pound strengthened against the South African Rand on Friday as demand for riskier assets declined due to heightened tensions between the West and Russia.

US secretary of State John Kerry accused the Russians of destabilising eastern Ukraine and warned that Washington will have no choice but to impose harsher sanction. He added that if Russia does not take action to try and de-escalate the situation then it would be a ‘grave and expensive mistake’.

“Given that the Rand remains highly correlated to the level of global risk appetite, we believe that the risk lies in extended Rand weakness into the South African long weekend. So long as there is nervousness surrounding Ukraine,” said Barclays Africa.

Next Monday will see South African markets closed for a national holiday.

Also putting pressure upon the Rand is the ongoing strike in the platinum mining sector. Negotiations between striking miners and employers are ongoing, but a deal remains elusive to end the three-month long disruption.

Yesterday the mining companies said they would take their latest wage offer directly to employees, after they failed to reach a deal with the Association of Mineworkers and Construction Union to end the 13-week long strike.

Sterling found support on Friday after retail sales data out of the UK came in better than forecast. Sales rose unexpectedly in March adding to evidence that the nation’s economy is picking up momentum and on course to make a strong performance in the first quarter.

According to the data released by the Office for National Statistics month on month sales increased by 0.1% in March, beating economist expectations for a decline of 0.4%.