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Strong close for Rand after shaky start

The Rand showed a lot of volatility last week. After opening at 21.75 to the Pound on Monday morning, it quickly soared to a day high of 22.44. By the end of the week, the local currency had made a strong recovery and closed at 21.86 to the Pound.

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One of the main drivers behind this volatility is the battle between South African Revenue Services commissioner Tom Moyane and Finance Minister Pravin Gordhan. The strengthening of the Rand was partly due to President Jacob Zuma’s public show of support for Gordhan’s budget. This seemed to assure investors that the President does not intend to remove the recently appointed Finance Minister.

Another factor contributing towards the Rand/Pound volatility is the uncertainty attached to a potential “Brexit”. The increased uncertainty about the UK’s future economic outlook has cast doubt in the minds of investors and resulted in the weakening of the Pound last week.

What to look out for this week: Bank of England Governor, Mark Carney, is scheduled to address Parliament on 8 March regarding his views on the United Kingdom’s EU status. His comments and their effect on investor confidence will cause changes in the market.

The South African Chamber of Commerce and Industry will be releasing the nation’s Business Confidence Index today, 7 March. This index indicates potential changes in economic growth and should therefore have an effect on the value of the Rand.

-Divesh Govender

Currency Review by 1st Contact Forex