Rand Report: Rand falters amid global second wave concerns

The rand report is brought to you by Sable International

Last week Tuesday ended with a stronger ZAR as US federal Reserve Chairman Jerome Powel highlighted the need for lower interest rates for the foreseeable future. This increased investors’ risk appetite and drove emerging market assets higher on the day.

This trend was not to last. A renewed increase in Coronavirus cases, especially in Europe and some parts of the US, dampened hopes of a quick economic recovery in those regions, thereby placing a cap on risk sentiment. This then drove emerging assets lower, including the ZAR. The ZAR opened at GBP/ZAR 21.37 and closed at 21.73 on Wednesday. 

This trend continued for most of the week and the GBP/ZAR ranged mostly between 21.55 and 21.76, ultimately breaching the 22.06 mark at the end of Monday. However, the further opening of the local economy (level 1 lockdown from 1 October) improved the outlook on the ZAR. This, together with an uptick in Chinese industrial production, which bodes well for emerging markets, has placed a cap on losses on the local currency. As economic activity returns to SA, investors will be turning their attention to local inflation data and the fiscal policy (especially the medium-term budget scheduled for October).

44f7d0a1 rand report graph 29 09 - Rand Report: Rand falters amid global second wave concerns
Image credit: Sable International

The ZAR continues to be driven mostly by external developments since it is very much dependent on risk sentiment and the movement of its fellow emerging market economies. However, local dynamics will start to become more important as the economy reopens and as local fiscal policy becomes known after the October medium-term budget. 

Market event calendar

Tuesday 29 September  

  • SA: Unemployment data 
  • SA: Business Confidence (SACCI) data 

Wednesday 30 September  

  • China: Manufacturing PMI 
  • UK: GDP data 
  • SA: Inflation data 
  • SA: Balance of trade 
  • US: GDP data 

Thursday 1 October 

  • SA: Manufacturing PMI 

Friday 2 October 

  • US: Non-farm payrolls

Leave a Reply

Your email address will not be published. Required fields are marked *