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ZAR stabilises, but does not soar

The Rand started firmly on Monday but lost ground as the week continued, thanks to the continuing slide in commodity prices along with being an EM currency. The student protests have also weighed on investor sentiments in the past two weeks.

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The Rand strengthened against the Dollar early on Wednesday along with its EM peers as investors expected the US Federal Reserve to keep interest rates unchanged. The South African Reserve Bank has mentioned previously that, due to the still rising levels of external debt, the economy remains at risk from a US interest rate.

The Rand weakened ahead of the Fed statement on Wednesday night, moving from 13.54 to 13.76 in just 20 minutes. The Rand recovered somewhat after the release of the statement, but it has stayed around the 13.70 mark since then.

Further weaker than expected US data lead to a slight Rand recovery on Friday, as the currency firmed to 13.83 from Thursday’s low of 13.8950. The Rand was unable to capitalize on this movement and remained largely unchanged going in the weekend. This was despite the better than expected local trade data which had shown trade deficit narrowing to R-0.9 billion from R4.9 billion.

What to look out for this week? Naamsa releases the October vehicle sales data today. With the consensus being a decrease to -7.7% y/y in October from -9.0% y/y in September. On Friday, the Reserve Bank will release the gross gold and foreign exchange reserves for October at 08:00. Consensus pencils in a slight uptick in both gross and net reserves.

-Clayton Wiggill

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