After strengthening against the US Dollar earlier in the week, and dropping back below the psychological 10 Rand per Dollar level, the South African currency extended gains during local trade. The currency’s advance was aided by the fact that the US Dollar remains broadly softer ahead of Friday’s all important employment figures.
At the current exchange rate 1 US Dollar will purchase 9.8811 South African Rand as of 10:10 am GMT
In response to the Rand’s positive movement Absa Capital analyst Mike Keenan noted: ‘We think the risk premium into the Rand has been prices in. Everyone is at the moment awaiting the US non-farm payrolls report and its implications on the US Federal Reserve’s stance on stimulus measures and Dollar.’
The commodity-driven currency was supported as foreign investors began buying local bonds once more.
However, while the Rand volatility which occurred in reaction to recent mining strikes may be fading, the local labour situation remains precarious and any concerning flair ups could take the Rand right back to the four-year lows recorded last week.
Comments issued by the Reserve Bank yesterday are also a cause of contention.
The South African Reserve Bank dwelt on the fact that South Africa’s economic outlook isn’t improving and asserted: ‘A key risk to the inflation and growth outlook has been and continues to be the prospect of sharply rising unit labour costs arising out of combinations of overly-high wage settlements and/or falling output and productivity. Wage, salary and price restraint at all levels, including executive pay, could underpin confidence and provide stability to prices, including that of the currency, in ways that boost economic growth.’
The central bank intimated that growth projections for the nation may be negatively revised when its Monetary Policy Committee next meets: ‘The bank’s forecast for growth at the May meeting was 2.4% with downside risks. With the latest data releases, this may need to be revised down at the next meeting of the MPC.’
The negative impact of a weak Rand was also alluded to.
Rand to US Dollar exchange rate is in for some significant volatility this week
According to RMB analysts, the Rand/Dollar pairing is in for some significant volatility this week and could move in large ranges, particularly because of Friday’s US non-farm payrolls report.
They added: ‘The Bank’s comments on the Rand were exactly in line with our thinking: the Rand is weaker than fair value, it risks overshooting further, and the major worry is the reduction of capital inflows.’
Current South African (ZAR) Exchange Rates:
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The US Dollar/South African Rand Exchange Rate is currently in the region of: 9.8811 >
The Pound Sterling/South African Rand Exchange Rate is currently in the region of: 15.1158 >
The Euro/South African Rand Exchange Rate is currently in the region of: 12.9081 >
The Australian Dollar/South African Rand Exchange Rate is currently in the region of: 9.4030 <
The New Zealand Dollar/South African Rand Exchange Rate is currently in the region of 7.8530 >
The Canadian Dollar/South African Rand Exchange Rate is currently trading in the region of 9.4774 >
(Correct as of 10:10 am GMT)
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