International

The dollar index saw short-term gains on Friday, peaking at 92.409 against a basket of six currencies during the session on the back of positive PPI data. Dollar strength is receding as lowering US treasury yields limit gains, but the dollar may continue to find support as positive economic data is released. The dollar index ended the session lower at 92.182. We look forward to the benchmark 10-year note on auction today to drive demand direction.

The euro was down in early session trade on Friday, weighed by rising Eurozone bond yields as investors doubt the ECB’s commitment to keeping interest rates, essentially the cost of borrowing, low. The euro’s recent rebound that saw it touch $1.1920, giving hope of a possible retracement back up to $1.2000 levels, was short-lived, as pandemic concerns sully sentiment. The single currency weakened to $1.1866 and ended the session at $1.1901

The pound briefly consolidated in early session trade to weaken to $1.3669 amid concerns of instability in Northern Ireland over post-Brexit trade barriers as the province borders the bloc of EU nations. The pound quickly rebounded, but showed that it may require some effort to bounce back to February’s $1.4200 levels. There’s still room to free itself from this bearish trend as both the dollar and euro currently face challenges. The pound ended the session at $1.3707.

ZAR

After trading at its strongest levels since the 24th of February in the previous session, reaching a low of R14.4475/$ on the day, the local unit pulled back to end the week weaker on Friday and predominantly trading the better part of the session on the backfoot. The rand, along with other emerging market assets have continued to benefit from high yield-seeking investors, on the back of a broadly weaker dollar, falling US yields, and the Fed’s policy direction, although the rand struggled to hold below $14.45/$, which might suggest a lack domestic fundamentals to provide an edge. The local unit rose to a high of $14.6244/$ before ending the session at $14.5937.

On Friday we had Net Gold & Forex Reserve data, which printed lower at $50.877 billion compared to $51.577 billion the previous month, and Gross Gold & Forex reserve data, which came out lower at $52.995 billion compared to $53.788 billion the previous month.

On the data front today, we have retail data from the EU, and we expect the local unit to continue following global trends and other market-moving 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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