SOUTH AFRICA

For The Rand is going from strength to strength backed by positive global data and stable economic and political situations in SA. The Rand didn’t weaken in response to swine flu as much as other currencies did, causing some investors to believe it is overpriced.

The Rand moved most on Friday afternoon in late trading as the US markets opened and non-payroll data was released. It was not as bad as expected again raising sentiment that the worst of the crisis is behind us. The unemployment figures had a double barrel effect, causing the US to weaken against major currencies, but also increasing risk appetite. This in turn led investors to invest in higher yielding assets and currencies.

Let’s briefly look at the main factors that affected the ZAR over the last week:

• The ZAR holds a massive 8%+ yield advantage against other currencies. This makes it attractive to buy and hold ZAR.
• Strong cabinet reassures foreigners investing in SA
• Better than expected data indicating worst of crisis is behind us.
• ZAR yet to push through the 8.25 mark against the USD.
• Political stability in SA backs the strong Rand after a smooth election process.

In the coming week we see secondary figures released which should have little impact on the currency. Local manufacturing and retail figures on Tues and Wednesday will probably give an indication on the state of SA’s economy.

While the ZAR is enjoying a good innings at the moment, the long term view of most investors is that it will continue to weaken as it is also expected of the SARB to slash interest rates to help accelerate the economy. It is also true that the ZAR gains have exceeded all other currencies and many believe that this is not justified as it’s based mostly on speculation.

View for the week: While the Sangoma is tied up in expense claims and scandals, we did manage to get an opinion: “The ZAR is a big ostrich on a little rooikrans twig. No matter how strong the twig, you still feel that it’s all going to break at some point.” Make of that what you will.

8.54 – Last Week’s High, April 21st
8.27 – Multi-day Low, April 24th
8.35 – Current Spot Price (support level 8.25)

Good luck for the week ahead.

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