Just a friendly reminder that today is my last Rand report for the week and normal service will resume on Tuesday the 2nd of July.? A lot will happen between now and next Tuesday, both on the economic and the political front, so let’s see where the Rand is this time next week.?
These are the mid rates at 5:55 today:
Brent Crude = $86.03 per barrel
- It was a difficult start to the week for the Rand as domestic uncertainty saw us give back some of last week’s gains, although things have moderated a little overnight.? We opened at R18.05 to the Dollar and fell to R18.24 as the day’s worst level, but with a recovery now underway we have pulled things back to R18.12 at today’s open.? ?
- Locally it’s all about who Cyril Ramaphosa selects as his cabinet members and understandably each party in the newly form GNU are vying for the most important positions of power.? Reports suggest that the DA have asked for 10 ministerial positions while the ANC’s initial offer was just 3, although new reports indicate that this offer has since been upped to 6.? Negotiations are ongoing and while this political squabble has weighed on the Rand, as seen in yesterday’s price action, a statement from the ANC saying that the selection process is well underway has calmed the market a little with the Rand moving back to R18.12.? ??
- The GNU saw two new parties sign up over the weekend, Rise Mzansi and the UDM, and the following from Sharenet suggests that this ever expanding collection of parties could actually become a negative for the Rand at some point:? The South African Rand slipped on Monday, as markets waited for President Cyril Ramaphosa to announce the cabinet lineup of his government of national unity. "Perceived friction between the GNU (government of national unity) partners is playing a role in today’s decline, although the Rand was due for a technical correction in any case," Danny Greeff, co-head of Africa at ETM Analytics, said. "By adding more parties to the coalition, the ANC is walking a fine line between forming an inclusive government and losing investor confidence by diluting the DA’s influence."
- Local political headlines will definitely impact the Rand but there’s no shortage of risk events from abroad including the Japanese Yen falling to just below 160/$1 and putting the market on intervention watch by the BOJ, the first presidential debate between Biden and Trump on Thursday night, the latest US PCE inflation reading on Friday afternoon and the first round of the French elections which starts this weekend.? Each of these have the ability to move the currency market and so the Rand has plenty to keep its eye on while also trying to navigate domestic headlines.?
- The most immediate international consideration is weakness in the Japanese Yen, this as a fall to 160.25 in late April triggered a $61bn intervention which at the time supported the Yen while hurting the Dollar, but that now looks like a very expensive exercise less than two months later.? The Rand is hoping that another round of Dollar selling is imminent, and the following is from Reuters:? The battered Yen languished near the 160 per Dollar level on Tuesday and kept traders on high alert for any intervention from Japanese authorities to prop up the currency. "The market is showing that they are nervous, and they are very much on edge about this situation," said Chris Weston, head of research at Pepperstone. “There are inherent risks to being short the Japanese Yen now as a carry trade, which is of course what (authorities) want to see. The first port of call is to tell currency speculators and people holding for carry that you're on notice, if you hold those positions now, you run the risk of a 400, 500-pip drop in Dollar/Yen."
- Local market news today sees our April leading business cycle indicator at 9:00.? ?
- Possible USD mid rate trading ranges in the Rand today are R17.95 and R18.25
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