the rand

Rand Report: Rand’s fate tied to global risk sentiment: Image: Supplied

Rand Report: Rand’s fate tied to global risk sentiment

The South African Rand depreciated more against a majority of currencies, including those from both emerging and developed nations.

the rand

Rand Report: Rand’s fate tied to global risk sentiment: Image: Supplied

Over the past week, the South African Rand weakened further against most currencies, including those from emerging markets and developed countries. Notably, the Rand declined by 2.04% against the New Zealand Dollar (NZD) and 1.43% against the Indonesian Rupiah (IDR). 

Despite these losses, the Rand has been relatively stable against the US Dollar and the British Pound (GBP), appreciating by R0.02 against each, with current rates at R18.87 to the USD and R23.86 to the GBP.

the rand
The Rand Graph: Image: Supplied

This situation highlights uncertainty among traders and investors, with increasing anticipation for the Rand’s next move. Typically, the longer a currency trades within a narrow range, known as a “coiling period”, the more significant the subsequent movement can be, driven by increasing anticipation and trading leverage.

Therefore, the future direction of the Rand against the US Dollar and the GBP could be significant, potentially involving a move of around 10% in either direction.

A critical factor influencing Rand’s next direction will be the Dollar Index (DXY), along with shifts between risk-on and risk-off periods in the investment climate. However, it is concerning that US indices are currently setting new weekly highs during this risk-on period, leading investors to avoid the Rand significantly. This trend could have negative implications if the market shifts to a risk-off stance. The DXY has remained within a specific range since last week’s report and is now facing a key technical resistance level.

The local economic data

Last week’s State of the Nation address in South Africa, presented by Cyril Ramaphosa, did little to boost confidence in the national currency or address the country’s pressing issues, focusing instead on promoting the ANC’s image.

The resurgence of stage 6 load shedding the day after the speech further dampened sentiment, affecting millions of households and businesses.

Regarding local economic data, South Africa will have limited releases this week, with retail sales data being the main focus. Expectations point towards a contraction, attributed to low consumer confidence, persistent high interest rates, and inflationary pressures.

In the US, attention will turn to inflation data, particularly the consumer price index (CPI) and core inflation rate for January, which could introduce market volatility.

Upcoming market events: 

Tuesday, 13 February

  • USD: Inflation rate month-on-month (January)
  • USD: Core inflation rate month-on-month (January)
  • ZAR: Mining production month-on-month (December)

Wednesday, 14 February

  • GBP: Inflation rate year-on-year (January)
  • ZAR: Retail sales month-on-month (December)
  • USD: PPI month-on-month final (December)

Thursday, 15 February

  • GBP: GDP month-on-month (December)
  • USD: Retail sales month-on-month (January)

Friday, 16 February

  • GBP: Retail sales month-on-month (January)
  • USD: PPI month-on-month (January)

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Check out the Sable International Currency Zone to get the latest live exchange rates and easily transfer your money into or out of South Africa.

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