SOUTH AFRICA

There was little data released last week with the bank holidays and for most part of the week, the ZAR remained range bound as it followed a weaker Euro for most part of the week.

By midweek we saw the Dow Jones lose 1.7% overnight, causing the ZAR to weaken as investors were more cautious towards risk. This, along with the weaker Euro, led the Rand to its weakest levels last week. In late trading on Thursday the Rand unexpectedly strengthened to below 9.90 against the USD as large ZAR purchases saw the demand for the Rand increase.

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

• The ZAR holds a massive 9%+ yield advantage against other currencies. This makes it attractive to buy and hold ZAR.
• Rand remains range bound, follows the Euro as ECB struggles to make policy decisions.
• ZAR strengthens on the back of large ZAR purchases.
• Political stability in SA backs the strong Rand ahead of elections on Wednesday.

Many would expect the ZAR to be weak ahead of the elections, but in reality with the ANC expected to win by a big margin, the political situation is rather stable. The question investors would be looking to ask is “By how far will the ANC win?”
This week also sees the US releasing their earnings for Q1. This could have a double effect; either risk appetite will increase as figures are positive, which should cause the ZAR to strengthen or demand for the more volatile ZAR will decrease if poor figures are released.

View for the week: After backing the USD to strengthen, the Sangoma revealed that data from the States could well be positive; indicating the worst of the recession is behind us. Never one to keep all her bones in one basket, she still sees the ZAR overpriced and expects it to weaken.

9.22 – Last Week’s High, April 15th
8.89 – Multi-day Low, April 16th
9.07 – Current Spot Price (support level 8.90)
 

Good luck for the week ahead.

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