Despite news that Zim wants to anchor its currency to the ZAR, the Rand remained strong against the Dollar. With the Rand currently below 10 to the Dollar, most analysts believe that it will still weaken in the next few weeks.

It is said that the ZAR has not yet priced in the low Dow Jones amongst other pointers that global growth outlook is bleak. Global risk aversion and worries over parent banking companies will also cause investors to stay clear of emerging markets.

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.
- Eastern European Banking woes spill over to other emerging markets.
- Selling pressure on stock markets due to weak US Economic data
- Current account deficit at 7% remains large

Should Zim adopt the ZAR, it will also adopt SA’s interest rates and monetary policy of the SARB (as do Namibia, Swaziland and Lesotho), however Tito Mboweni has already ruled out a formal agreement with Zimbabwe.

The higher interest rates in SA are still protecting the ZAR against a massive sell off, however this is expected to change as most economists predict the interest rates to be cut before the next scheduled MPC meeting. This is also due to higher than expected inflation 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.

10.27 – Last Week’s High, Feb 17th
9.97 – Multi-day Low, Feb 19th
9.97 – Current Spot Price (support level 9.75)

View for the week: With inflation figures due to be released, expect a “surprise” rate cut before the next MPC meeting – this could see the Rand weaken against the US$.

Good luck for the week ahead.

Exchange4free FX Dealers : 0207-858-1039

- Book a live exchange rate online
- Great exchange rates
- No transfer fees
- Zero commissions