International

The start of yesterday’s trading session carried momentum from Monday’s and saw the dollar falling further, allowing the index to dip below 91.000. However, as the day progressed, the dollar managed to pull back those losses and post further gains as risk appetite subsided. The dollar index reached a high of 91.279 and ended the session at 91.241.

The euro too continued its momentum, strengthening during the day to break through its 100-day moving average and reaching a high of $1.2080. The tide turned on the euro too, but the common currency still managed to avoid taking losses on the day and closed the day flat against its open at a rate of $1.2036.

Pound Sterling was not the exception to the rule, continuing to strengthen, and surpassing the $1.40 level, reaching a new high of $1.4009, a level last seen at the beginning of March this year. The pound’s fall, however, was much greater than others as the shift in sentiment brought the pound to a low of $1.3926. The pound ended the day yesterday at $1.3937.

ZAR

The rand was weaker against the dollar yesterday, the dollar steadying as investors await some change in developed market interest rates. The rand remains the best performing EM currency, but local structural inefficiencies are rendering it sensitive despite global factors supporting risk-on sentiment. The rand strengthened to R14.1779/$ early in the session, weakened to R14.3304/$ in the evening, to close us out at R14.3032/$

We have local CPI data today in the morning, with an expected rise in the key YoY macroeconomic figure on account of rising fuel prices. Reuter’s analyst poll anticipates it to print at 3.2% YoY, and Absa Research at 3.3% YoY, both well within the target 3 – 6% range.

Rand, and other EM currency strength, has been a way for investors to imply a demand of change in developed market yields, but the developed market remains a low interest rate environment. Other key data to potentially also assist sentiment today is the ECB’s interest rate announcement expected in the afternoon, but forecast at remaining unchanged. Little impact is expected on the rand, but nothing is ever certain in markets.

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

Demand for haven currencies, and particularly, the dollar continues to dwindle, and the greenback found itself falling further from grace yesterday. The dollar index fell more than half a percent yesterday on improved risk sentiment and a strong rebound on the euro, reaching levels last seen at the beginning of March this year. The dollar index reached a low of 91.034 and ended the session at 91.069.

The euro surged forward yesterday aided by the shift in sentiment but more specifically due to additional support for the common currency due to an increased rate of vaccine rollout across the Eurozone as well as the acquisition of additional doses. The single currency reached a high of $1.2048 and ended the session at $1.2037.

Pound Sterling with a phenomenal day yesterday, strengthening 1.11% on the day to attempt to break the $1.40 level, but fell just short, reaching a high of $1.3993. The pound continues to show its resilience and strength, leaping two-fold when the opportunity arises. The pound ended the day yesterday at $1.3986.

ZAR

The rand managed to recover some of Friday’s losses yesterday, still benefitting from subdued US Treasury yields as investors flock to the local unit’s attractive yields. Commodity prices have also been lending support in the EM space, as global trade conditions improve. The rand was strong at R14.1669/$ on the day but ended the session at R14.2144/$

The rand may have more room to strengthen further if current EM currency drivers remain forefront for investors. The receding nature of US Treasury yields has the rand eying the psychological R14.00/$, with last week’s test at R14.1394/$ a sign of this, and a break below the R14.10/$ a potential accommodation. Local fundamentals have little impact on the rand’s current direction, but this remains our local unit’s Achilles heel.

We look forward to CPI data out tomorrow for colour on the local economy, but have nothing on the local data card for 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.