Several domestic shocks have clipped ZAR’s wings – Image: AdobeStock

Rand Report: Rand finds strength amid heated Ukrainian conflict

We have excluded the Russian Ruble from the analysis in our rand report due to the extreme volatility associated with the currency.

by Sable International

16-03-2022 16:12

in Business & Finance

Several domestic shocks have clipped ZAR’s wings – Image: AdobeStock

The South African rand was a shining star over the past week, strengthening against 17 of the top 19 currency pairs. With little South African data released last week, soaring precious metals prices have been the main driving force behind the ZAR’s strength. The rand made steady gains, despite the reimplementation of loadshedding.

The US Dollar had a mixed performance last week, weakening against 10 of the top 19 currency pairs. Inflation hit multi-year highs, with the added pressure of increased fuel prices and sanctions against Russia causing additional uncertainty in the global economy. Coupled with the recent rand strength, we saw the USD/ZAR pair move down by 2.12%. After starting the week at R15.39, the pair fell to a low of R14.96, before rising and closing the week at R15.06.

The Pound was the poorest performer of all major developed currencies. The GBP/ZAR moved down by a whopping 3.52%, from an opening of R20.36. After breaking through the R20.00 barrier, the pair closed off the week around the R19.65 level.

The Euro’s performance has taken a comparative turn for the better after a few dismal weeks in the FX markets. Nevertheless, the EUR/ZAR declined by 2.27% due to the rand’s strength, closing the week at R16.43 after opening at R16.82.

The highly anticipated US Fed interest rate decision will be released this Wednesday. Although analysts were expecting a 0.5% rate hike, those expectations have been revised to 0.25% amid the current geopolitical climate.

On Thursday, the Bank of England will also announce its interest rate decision. We expect this to be quite an event as the market expects a 0.25% rate hike, bringing the interest rate to 0.75%. In the rare case of it not raising rates, the GBP would weaken drastically.

There is very little significant data out of South Africa this week, and analysts must remain cautious regarding this bout of ZAR strength. Global factors and the interest rate decisions, from both the US and UK, will be the main events to monitor. Analysts will also continue to monitor the developing conflict in Ukraine, and the effects of this on the Eurozone and the broader global economy.