SOUTH AFRICA, Monday 17 September 2018 – After the recent doom and gloom, last week finally brought some welcome relief for us Springbok supporters, and it wasn’t a bad week for the Rand either! By Bruce Burnett.
These are the mid rates as at 8:25 today:
USD = 14.5
AUD = 10.70
GBP = 19.56
NZD = 9.81
EUR = 17.40
Brent Crude = $77.70 per barrel
The Rand managed a 2% gain against the Dollar last week which could have been closer to 4% had it not been for a bit of profit taking on Friday afternoon plus Trump chiming in to ruin the show. We opened last Monday at R15.27 to the Dollar and closed on Friday at R14.95, but this was down from R14.68 earlier in the day.
Turkey and Russia surprised the market with interest rate hikes last week coupled with Moody’s giving an upbeat assessment of South Africa’s economic outlook combined to push the Rand stronger. The Rand gaining 4% against the Dollar when we were trading at R14.68 shows how oversold the currency has been and this was emphasised by a note by Johann Els (Head of Old Mutual Investment Group) who said that emerging markets are not in as bad a shape as the market assumes and that the Rand will make a sharp recovery once we get a better understanding of our economic reform policies.
Talking about reform policy the presidency released a statement yesterday confirming that their imminent stimulus package is aimed at boosting economic activity and confidence in sectors affected by regulatory uncertainty. Industries in focus include the mining, telecommunications, tourism and transport industries, and “the stimulus package will re-prioritize government spending, within the existing fiscal framework, toward activities that will stimulate economic activity,” according to the statement.
Last week was a busy one when looking at local market data, and while we have consumer inflation numbers on Wednesday all eyes will be on the Reserve Bank as they announce our interest rate on Thursday. While a recent Bloomberg poll saw 19 out of 20 analysts predicting that our repo rate will remain unchanged at 6.5% there are others who feel that this decision is too close to call, and even a few analysts who are bullish that a 25 basis point hike will be announced. The Rand could be jittery up to the announcement but if we get a surprise hike that should strengthen the currency.
The following MoneyWeb: “An interest-rate hike by the SARB would not go against the trend, while the US interest-rate cycle still has further to climb and risk-aversion levels have not subsided to the point of persistent risk-on yet,” said Investec chief economist, Annabel Bishop.
But as usual we are also at the mercy of international developments and reports that Trump is ready to move ahead with tariffs on $200bn worth of Chinese goods poses a significant threat to the Rand. Trump could announce the tariffs as soon as today although it is suspected that the tariff will be 10% and not 25%, but this could put the upcoming trade talks between the US and China at risk and would be Dollar positive as a safe haven currency.
No local market data today.
Possible USD mid rate trading ranges in the Rand today are R14.80 and R15.10.
LOOKING TO INVEST OFFSHORE?
About the author: Bruce Burnett is an Executive Financial Consultant at Quattro Finance. With a demonstrated history of working in the financial services industry, Bruce is skilled in Business Risk Management, Financial Planning, Public Speaking, and Retirement Planning. For more information contact Bruce on +27 (0)31 242 5100 (W) or +27 (0)82 459 2734 or via email to firstname.lastname@example.org or visit www.qfg.co.za. Follow Quattro Finance on Facebook, LinkedIn, and Twitter @QuattroFinance