Despite the volatility dominating the foreign exchange market in recent weeks, and the pressure piled on emerging market/commodity-driven currencies, the Rand was able to post a modest gain against the US Dollar as the local session began.
At the current exchange rate 1 US Dollar will purchase 9.9395 South African Rand as of 10:30 GMT
The Rand pushed back below the key ten Rand per US Dollar resistance level as investors covered their short positions in spite of the fluctuations seen in the Chinese equity market.
Against the Euro the Rand was also moderately stronger.
The Rand’s advance on the US Dollar was aided by remarks issued by two Federal Reserve Presidents regarding the scaling back of quantitative easing in the world’s largest economy.
According to Richard Fisher, President of the Federal Reserve Bank of Dallas: ‘What we’re talking about here is dialling back. The word ‘exit’ is not appropriate here.’
Similarly, Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, stressed that fiscal policy would remain accommodative for ‘a considerable time’ after QE is brought to an end. Kocherlakota also asserted that the current level of bond-buying should continue until the unemployment rate has dropped: ‘The committee should continue to buy assets at least until the unemployment rate has fallen below 7 per cent. [Purchases should continue] as long as the medium-term outlook for the inflation rate remains below 2.5 per cent and longer-term inflation expectations remain well anchored.’
Both officials intimated that investors’ response to the Fed’s recent policy announcement was not a cause for concern.
The Rand hit a high of 9.89o5 against the US Dollar
But the Rand’s recent recovery may not last.
As stated by Absa Capital: ‘this bout of short-covering is likely to once again prove temporary, given that the outlook for emerging market assets and commodity prices have become less favourable […] we would look to fade Rand rallies at this juncture, mainly on the back of the risk-off trading environment. Although with another large domestic foreign trade balance deficit expected later this week and simmering domestic labour tensions in the background, the domestic backdrop is also not conductive to any sustained improvement in Rand sentiment over the coming days.’
Today’s US news, including durable goods orders and house price data, is likely to inspire further movement in the USD/ZAR pairing.
South African economic news to look out for this week includes tomorrow’s consumer confidence figure and Friday’s balance of trade data.
Current South African (ZAR) Exchange Rates
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The US Dollar/South African Rand Exchange Rate is currently in the region of: 9.9395 <
The Pound Sterling/South African Rand Exchange Rate is currently in the region of: 15.3310 <
The Euro/South African Rand Exchange Rate is currently in the region of: 13.0582 <
The Australian Dollar/South African Rand Exchange Rate is currently in the region of: 9.2389 <
The New Zealand Dollar/South African Rand Exchange Rate is currently in the region of 7.9557 >
The Canadian Dollar/South African Rand Exchange Rate is currently trading in the region of 9.5452 <
(Correct as of 10:30 GMT)
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