International

The US dollar Index staged a recovery against its rivals in yesterday’s session following the Fed’s minutes, which showed the Bank’s intentions to continue its policy easing strategy. Rising US yields on the day, along with gold giving up some gains, most likely contributed to the dollar strength as well. The greenback rose to a high of 92.499 before ending the session at 92.455 on the day.

The euro initially broke out in its early activities on Wednesday, trading at a week’s high on the day. Although intraday day trades saw the single currency took a knock, giving back all its gains, as investors repositioned their bets following the FOMC minutes. The common currency rose to a high of $1.1914 before pulling back to end the session flat at $1.1871.

Pound sterling booked some heavy losses again yesterday, falling victim to the greenback’s recovery, on the back of the Fed’s unwavering support through prolonged monetary policy accommodation. Despite the market’s optimism on the UK’s vaccine progress, the lifting of some lockdown regulation to allow for the re-opening of pubs and other shops, along with positive economic data, the pound remained offered on the day. The British pound fell to a low of $1.3725 before ending the session at $1.3739.

ZAR

The Rand found itself gradually weakening over the day yesterday, unwinding the gains it had made to get to the lower R14.50s. With the return of dollar strength in yesterday’s session, the Rand was under pressure and reached a high of R14.6003/$ before closing the day at R14.5741/$.

Since breaking the R14.60 level over the long weekend, the Rand has maintained a fairly tight 10 cent range each day between the next resistance level of R14.50/$ on the downside and R14.60/$ on the upside. We are likely to maintain this range in the short term this week barring any major surprises on data releases or severe shifts in risk sentiment.

Yesterday’s release of Markit PMI data was the sixth consecutive increase on the figure albeit extremely marginal each time which is not enough to signal a major turnaround in recovery at this stage. Due to the marginal increase, the rand did not react much to the release and continued on its upward path as a result of the stronger dollar.

Much like the rest of this week, very little data on the cards today with the spotlight being on Jobless Claims data out of the US. We expect the Rand to remain in its tight range unless we have any surprises on news headlines or data releases.

This communication (“this communication”) has been provided by the corporate and investment banking division of Absa Bank Limited a registered bank in the Republic of South Africa, a subsidiary of Absa Group Limited, with company registration number: 1986/004794/06 and with its registered office at: Absa Towers East, 3rd Floor, 170 Main Street, Absa Towers West, 15 Troye Street, Johannesburg 2001, Republic of South Africa (“Absa”). Absa is regulated by the South African Reserve Bank. Absa has provided this communication for information purposes only and you must not regard this as a prospectus for any security or financial product or transaction. This communication is from an Absa Sales and/or Trading desk and is not a product of the Absa Research department. This communication has not been produced, reviewed or approved by the Absa Research Department, and is not subject to any prohibition on dealing ahead of the dissemination of research. The views in this communication are not a personal recommendation and do not take into account whether any product or transaction is suitable for any particular investor. This message is subject to the terms and conditions at: http://www.absa.co.za/disclaimer. This communication is confidential and no part of it may be reproduced, distributed or transmitted without the prior written permission of Absa.

International

The dollar kicked off the week to a great start as risk sentiment shifted to the cautious side due to mounting concerns over hedge fund defaults, sending investors to havens. Upbeat US economic data as well as the COVID-19 vaccine rollout across the US being on track, or possibly even ahead of schedule, aided the greenback in its surge forward, allowing the dollar index to reach a high of 92.964 and ended the session at 92.944.

The euro pulled back and reversed the gains made last Friday due to declining risk sentiment and dollar strength, while concerns over the economic impact of a third wave of COVID-19 infections, and similarly lockdown restrictions, added fuel to the fire. The single currency traded at a low of $1.1761 just before ending the session at $1.1764.

The pound continues to show its resilience and maintains its position as the best performing G10 currency for the year as it surged forward in early trade. Most of the recent gains for pound sterling can be attributed to the faster vaccine rollout across the UK, with a total of 30 million adults already vaccinated. This despite the EU trying to cause a vaccine war with the UK, with Brussels threatening to stop the export of doses to Britain.  The pound rose to a high of $1.3847, before falling to a low of $1.3756 and ended the day only marginally in the red at $1.3763.

ZAR

The rand was range-bound for the better part of the day yesterday, teetering around R15.00/$ before picking a side and recovering against the dollar, despite increased dollar demand. The rand remains sensitive to US inflation speculative views that have caused the rand’s uncertain nature. Our local unit strengthened to R14.7835/$ and ended the session at R14.9117/$.

We look forward to German inflation and US consumer confidence data out today to influence EM currency direction today.

This communication (“this communication”) has been provided by the corporate and investment banking division of Absa Bank Limited a registered bank in the Republic of South Africa, a subsidiary of Absa Group Limited, with company registration number: 1986/004794/06 and with its registered office at: Absa Towers East, 3rd Floor, 170 Main Street, Absa Towers West, 15 Troye Street, Johannesburg 2001, Republic of South Africa (“Absa”). Absa is regulated by the South African Reserve Bank. Absa has provided this communication for information purposes only and you must not regard this as a prospectus for any security or financial product or transaction. This communication is from an Absa Sales and/or Trading desk and is not a product of the Absa Research department. This communication has not been produced, reviewed or approved by the Absa Research Department, and is not subject to any prohibition on dealing ahead of the dissemination of research. The views in this communication are not a personal recommendation and do not take into account whether any product or transaction is suitable for any particular investor. This message is subject to the terms and conditions at: http://www.absa.co.za/disclaimer. This communication is confidential and no part of it may be reproduced, distributed or transmitted without the prior written permission of Absa.

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