October has been characterised by a rough and rocky road for the rand. Here’s the breakdown of the good, bad and the ugly from the last month.
The rand value has fluctuated to some superb highs and shuddering lows in October, as the currency’s rollercoaster ride was forced to navigate some tricky loops and corners last month.
We’re looking at how the ZAR performed against other major currencies, and summarise what went right and wrong over the last 31 days.
Nenegate, part two
After a rocky September, the rand made a bullish start to October, and threatened to break through the R14 barrier against the dollar. However, when ex-Finance Minister Nhlanhla Nene was forced to resign after his Gupta meetings were made public, the rand tanked.
On 9 October, the currency plummeted to R14.96, avoiding the R15 threshold by the skin of its teeth.
Mid-Term budget speech
Tito Mboweni stepped in to replace Nene, and his first task was to deliver the MTBPS to Parliament. He handled it relatively well, but the markets weren’t enthused by the harsh realities he had to address. Mboweni also failed to provide comprehensive details of where the money would come from to fund certain policies.
Tito’s appointment initially eased the market as he was seen as a sensible choice for the cabinet. However, the rand ballooned over the R14.50 mark again, eventually reaching R14.75 by the end of the week.
Tito Mboweni appointment
Despite the budget speech hiccup, Mboweni was initially well-received by the rand. Amid the chaos of Nene’s personal life, his replacement was seen as a stable step in the right direction.
Moody’s delay credit decision
A decision by Moody’s to delay its review on South Africa’s sovereign debt buoyed the rand just a few days after Mboweni became finance minister. The immediate threat of a credit downgrade was averted, thus restoring a little confidence in the economy.
Despite strong performances in the stock market, the greenback has also been vulnerable to ramped-up rhetoric about a trade war with China. The rand has been able to claw some ground back against its American counterpart due to the threat of increased tariffs being imposed by both countries.
High: R14.08 – 1 October.
Low: R14.96 – 9 October.
Speaking of ongoing disputes, the pound lost a bit of confidence against the rand towards the end of the month, as a “no-deal Brexit” becomes a possibility in the UK. Chancellor Philip Hammond’s budget speech also did very little to motivate the sterling this week.
High: R18.32 – 23 October.
Low: R19.63 – 7 October.
Recently-released economic data for the European Union showed less progress than expected, causing a miniature slump this week. “No deal” fears have also seen the Euro slide.
High: R16.17 – 23 October.
Low: R17.24 – 7 October.
Sable International have delivered their outlook for the rand over the next seven days. Although the Moody’s delay helped SA in October, their decision is inevitable, and it will have consequences for Mzansi:
“Expect more volatility this week. Moody’s is set to report on its rating soon and global equity market woes will contribute to further risk-off sentiment in emerging markets. One also needs to keep an eye on the continuing trade turbulence between world powers as well as an ever-shifting local political climate.”
“The ZAR is expected to trade in the range of R14.40 and R14.90 to the USD for the rest of the week.”