Cyril Ramaphosa

Photo by Gallo Images / Sowetan / Mduduzi Ndzingi

Early gains lead to volatility as political factors weigh in on Rand sentiment

Gains were recorded for the Rand last Monday, breaking the R14.50 to the Dollar mark before closing at R14.54.

Cyril Ramaphosa

Photo by Gallo Images / Sowetan / Mduduzi Ndzingi

This comes as more stability in emerging markets started to filter through to the South African financial markets. The uptrend continued on Tuesday when the Rand gapped stronger and opened the day at R14.42 and continued to gain, peaking at R14.14 (the high for the week).

These gains continued on Wednesday due to President Cyril Ramaphosa providing some clarity on the land expropriation policy. Sentiment improved accordingly during the latter part of the day as the Rand recorded further gains.

Thursday saw the reversal of the previous day’s gains and significant increases in volatility. This is attributed to Donald Trump’s early morning tweet on South Africa’s land expropriation policy, which most commentators stated was ill-informed.

However, this did highlight the fact that South Africa’s land expropriation policy is being recognised internationally and may be ill-perceived. The Rand accordingly closed lower for the day at R14.39 to the Dollar. Volatility spilled over into Friday and saw the Rand ranging between R14.34 and R14.20 to the Dollar.

The Rand continued to range between the above-quoted figures during yesterday’s morning trade. Significant gains were then recorded for the latter part of the day and it closed at R14.12 to the Dollar.

This week all eyes will be on the South African M3 money supply and private sector credit data to be released on Wednesday. Stronger credit data will contribute to positive sentiment toward the Rand, thereby driving Rand strength.

Date What’s happening Why it’s important
Wednesday 29 August ·  Japanese consumer confidence

· US GDP growth rate Q2

· Weak consumer demand can be a precursor for weaker local economic performance. This will then impact the Yen lower.

· This impacts the medium-term sentiment toward the Dollar.

Thursday 30 August ·  EU business confidence

·  US personal income and spending data

· Stronger business confidence will drive strength in the Euro

· Income and spending influence the money supply thereby driving the strength (due to demand factors) of the Dollar.

Friday 31 August · British consumer confidence

· EU unemployment rate

· Local economics are driven to a large extent by consumer confidence. This will continue to drive strength into the Pound.

· Contributes to the long-term consumer climate, thus driving further strength (or weakness) into the Euro.