The rand maintained direction yesterday, extending previous session gains to recover against the dollar, trading back below R15.10/$ as the rand still benefits from positive growth data, and improvement in appetite for riskier assets as US Treasury yields tapered. Our local unit strengthened to R15.0462/$ and ended the session at R15.0592/$.
The rand caught a break, having recovered 3.3% over three sessions. Commodity prices are chasing eight-year highs, but the commodity-linked rand continues to lag, failing to fully benefit from this improvement. Despite growth data printing above expectations, the rand remains very sensitive to external factors. Any further rate gains may be limited as load shedding resurfaces, shining a light on one of South Africa’s long-standing weaknesses.
South Africa’s current account, mining and manufacturing production data are expected out around midday today to give further clarity on how South Africa closed out 2020 and began the year. We anticipate global factors to also drive markets.
Expected ranges for the day:
- USDZAR: R14.9000 to 15.3000/$
- EURUSD: $1.1900 to 1.1970
- GBPUSD: $1.3900 to $1.3990
The dollar decline extended yesterday, initially being kicked off by a slide in treasury yields, boosting risk appetite. Later during the day, after the release of US inflation data, the dollar declined further as core CPI printed softer than expected. The dollar index reached a low of 91.768 before ending the session at 91.823.
The Euro managed another day of gains as sentiment improved with the dollar on the backfoot. The euro seems to be following global trends at the moment while it awaits the next ECB meeting. The single currency reached a high of $1.1930 and ended the session at $1.1929.
Pound Sterling too posted gains yesterday, brushing off deadly UK COVID variant jitters and taking advantage of the weaker dollar. Vaccine rollout optimism remains a strong driver for the pound at the moment. The pound reached a high of $1.3938 and ended the session at $1.3932.
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