An emergency rate meeting was expected on Thursday last week and it went as far as the SABC receiving instructions to keep the cameras on standby. SA’s economy shrunk for the first time in a decade and a rate cut can still be expected, despite disappointing inflation figures.

SA’s trade deficit widened to a record gap of $1.76bn as the global crisis hits the demand for precious metals exports and local vehicle sales plunge.

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

- The ZAR holds a massive 10%+ yield advantage against other currencies. This makes it attractive to buy and hold ZAR.
- Record trade deficit weighing heavily on local economy.
- Disappointing inflation figures, suggestion rate should not be cut.
- Figures suggest SA economy is shrinking

Inflation outlook remains bleak as it was announced that petrol prices will rise again from March the 4th. This adds to figures released suggesting that inflation is declining slower than expected.

Last week saw the ZAR gaining against the USD as the Euro also strengthened. Unfortunately this was short lived as the ZAR lost some ground on late Friday trading due to the shocking trade deficit figures.

We should see the ZAR weakening in the next few weeks and it is a good idea to watch it closely, should you wish to send money.

10.16 – Last Week’s High, Feb 22nd
9.84 – Multi-day Low, Feb 19th
10.37 – Current Spot Price (support level 10.10)

View for the week: With global risk aversion still playing a massive part in the ZAR and disappointing figures being released in SA, expect the ZAR to weaken against major currencies.

Good luck for the week ahead.

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