The South African rand traded most of the Asian session in green yesterday, attempting to continue with the momentum we have seen in the previous two sessions. Though the local currency struggled quite a bit to hold on to its earlier gains, as late trades along with the coming in of the American session saw the rand sliding higher, on the back week factory data and concerns over further monetary policy easing, which is most likely to see inflation rise. The rand reached a low of R14.8487/$ before reversing all its gains to reach a high of R15.1070/$ and finally closing the day at R15.0785/$.
The local unit continues to struggle with returning to its recent normal levels, with both domestic and global headwinds creating a tough environment for the rand. In our backyard, the path to fiscal consolidation remains well-received, although the market is still wrestling with its implementation, given a few anticipated setbacks or challenges from key stakeholders. Globally, prospects of continued monetary policy easing from major economies, rising yields, and inflationary threats continue to drive attention away from emerging markets and risky assets.
Locally we have no significant data for today, and internationally, investors will be looking out for Jobless Claims data in the US, along with Unemployment Rate data in the EU amongst others.
The dollar index continued its downward trend early in the session, with the dollar trading lower as service reports released yesterday disappointed, helping commodity currencies find support on the back of improved risk sentiment. The safe currency managed to recoup some gains in the second half as yields picked up, further boosted by the announcement that there will be enough vaccines for every American adult by the end of May. The dollar index closed just shy of the 91.00 psychological level as the market awaits Fed Chair Jerome Powell to speak tonight on recent events surrounding US Treasuries. The dollar index reached a low 90.640 to close off at 90.979.
The euro found support amid early session dollar selloff to briefly trade above the $1.2100 level but gave back some gains as investors still concerned about rising yields which may negatively affect economic growth. The single currency strengthened to $1.2109 and ended the session at $1.2063.
The pound traded sideways yesterday, closing out little unchanged from where the session began as investors were left conflicted. Finance Minister Rishi Sunak’s positive remarks on plans to do whatever it took to keep the UK economy intact were diluted by plans to hike taxes in 2023 to finance the same initiatives that are aimed at upholding economic stability, resulting in capped gains. The pound traded a high $1.4004 and ended the session at $1.3959.
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