SOUTH AFRICA

For most part of the week the Rand remained range bound as little data being released saw the Rand follow the stronger Euro as the GBP got taken to the cleaners following Wednesday’s budget.

For most part of the week the focus was on a very smooth election in SA which the ANC, as expected, one overwhelmingly. Stability was in the order of the day as the Rand strengthened further on the back of Trevor Manuel’s comments that he believes the newly elect President Zuma will steer the economy in the right direction.
Adding to the stronger Rand is a weaker Sterling as the state of public financing and borrowing requirements were released.

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.
• Little data released due to bank holidays in SA.
• As risk aversion decreases, the ZAR strengthens as investor are willing to take more risks.
• ZAR strengthens on the back of large ZAR purchases.
• Political stability in SA backs the strong Rand after a smooth election process.

This week we see a busy week with lots of data being released as SA have an interest rate decision on Thursday and key US and UK data are to be released on Friday.

The outbreak of swine flu across the globe is striking fear in individuals in more ways than one. We’ve seen investor’s be very cautious as this is expected to hit tourism hard, adding to the recession woes and increasing demand for your safe haven currencies such as the Yen.

View for the week: Having spent some time on the trading floors and expressing educated views such as “the USD is the best-looking horse in the glue factory”, our in house Sangoma still thinks the Rand is overpriced and should weaken, especially with the interest rate announcement coming up.

9.12 – Last Week’s High, April 21st
8.71 – Multi-day Low, April 24th
8.81 – Current Spot Price (support level 8.70)
 

Good luck for the week ahead.

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