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Rand rally fades

The Rand began last week on a strong note, strengthening from 20.7937 against the Pound on Monday morning to a weekly low of 20.3648 on Wednesday evening. These gains were short lived as the Pound regained earlier losses to the Rand as the currency pair closed out the week at 20.7478.

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The Rand’s solid start to the week is attributed to negative outlook forecasts released by Her Majesty’s Treasury regarding the economic effects of a British exit from the European Union.

The Rand’s fortunes over the second half of the week were not as rosy. Concern over a possible downgrade in South Africa’s credit rating by credit agencies has continued to weaken the volatile currency. In addition to this, increased support for the UK to remain part of the EU reduced uncertainty over a possible “Brexit” further compounded the weakening of the Rand against the Pound.

What to look out for this week: Locally there is very little happening in terms of data releases or important economy-related announcements. However, the US Federal Reserve will be releasing their interest rate decision on Wednesday, which will have an impact on the Rand. A possible interest rate increase by the Fed will cause the Rand to weaken against the U.S Dollar.

– Divesh Govender

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