The Rand weakened substantially yesterday, registering a 3.52% decline on the day to put us back at levels last seen at the beginning of the month, essentially wiping out all traction the local unit has made. The Rand reached a high of R15.1089/$ and ended the session at R15.0700/$.
The first 30 cents of the move occurred during our trading hours and it seemed that the Rand was meeting some resistance at the R14.80/$ level, trying and failing 3 times to break through it. However, as 5:30pm hit, the ZAR flew through the level and kept going, moving an additional 30 cents yesterday evening.
The move weaker seems, in part, due to a stronger dollar in late trading yesterday, but since the Rand weakened substantially more than its Emerging Market peers, this could not be the only reason. Enough time has now passed for traders to unpack and analyse Finance Minister Tito Mboweni’s budget and while the initial reaction may have been positive, markets have realised that what the Minister is proposing is an extremely tall ask and will be difficult to achieve and implement successfully.
The only local data release today is the January Trade Balance, which is expected to be in surplus once again, albeit a smaller surplus than December’s figure. On the international side, data from the US and Eurozone will give more indication as to how these economies are faring coming out of the global pandemic and will affect risk sentiment accordingly.
The USD dollar index tracked lower on Thursday, breaching the previous six-week low to trade at its seven-week low, before consolidating the day’s losses to end the session relatively firm. Increasing US Treasury yields, dovish policy environment, stimulus expectations, and concerns over prospects of accelerated inflation continued to underpin price directions in global markets on the day. The greenback fell to a low of 89.683 before pushing back to end the session relatively firm at 90.134.
The euro had a great run yesterday, breaking out to trade at its seven-week high on the day, although the pair’s gains were capped by rising yields in the US, which saw the dollar gaining some grounds. The single currency rose to a seven-week high of $1.2240 before giving up some profits to end the session at $1.2178.
Pound sterling paused its rally on Thursday, coming off its recent highs, with the dollar strength on the day derailing the pound’s bulls. The cable fell to a low of $1.4001 before ending the session at $1.4015 on the day.
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