International

Following a short-lived recovery on Thursday as the market was reacting to the FOMC minutes, the US dollar index corrected its uptrend yesterday, as investors continued to internalize the implications of the Fed’s commitment. An unexpected increase in US weekly jobless claims also put the greenback under pressure throughout the session, which saw the dollar tracking on the back foot, and other safe-havens such a gold, having a field day. The greenback slipped to a low of 91.999 before ending the session at 92.059.

The euro found some sense of conviction on Thursday, after consolidating in the previous session. It has really been more of a dollar story than anything else on the day, with rising jobless claims pointing to a struggling labor market in the US, and the Fed’s policy priorities undercutting the greenback in the short-term. The single currency rose to a high of $1.1927 before ending the session at $1.1916.

The pound sterling paused its downtrend on the day, after selling-off for two consecutive sessions. The British pound went into consolidation, thanks to broader dollar weakness, which capped the pound’s losses. The pound remains broadly attractive in the market, on the back of UK’s success on the vaccine front, which will most likely see a significant return of economic activities and also aiding in improving prospects of economic recovery in the near term. The cable rose to a high of $1.3781 before consolidating to end the session flat at $1.3735.

ZAR

The Rand gathered its momentum and powered through R14.50/$ to reach a low of R14.4474/$. While the local unit lost steam in late trading, it still managed to close in the low R14.50s, closing the day at R14.5176/$.

Dovish Fed minutes sparked a return to risk sentiment which was the catalyst that assisted the Rand with its move lower yesterday and the Rand was one of the best performing currencies on the day vs the dollar.

To end of the week, once again, very little on the data cards for the day with the spotlight on US PPI data later this afternoon. We expect the Rand to continue being sentiment driven and remain in its range due to lack of data and major events.

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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