International

The dollar maintained its climb yesterday, supported by positive manufacturing and services data, along with remarks from Fed officials on confidence in the US making an economic recovery, further stating that they expect 2021 to be a very strong year despite inflation remaining a concern for investors. The dollar index reached a high 92.604 and ended the session at 92.586.

The euro was on the backfoot again yesterday, weakening further against the dollar as the bloc experiences setbacks. Despite positive economic data prints yesterday, especially for Germany, the largest economy, strict lockdown restrictions due to being hard hit with a third wave of COVID-19 and delays in vaccine rollout have eroded confidence, with the single currency trading the weakest it has since November. The euro weakened to $1.1808 and ended the session at $1.1812

The pound extended losses against the dollar yesterday but appears to still hold firm against other rivals as recent disputes with the EU and challenges around acquiring enough vaccines have diminished growth optimism. The pound weakened to $1.3676 in early session trade and ended the session at $1.3683

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.

ZAR

The rand was firmer halfway through the session yesterday in response to the awaited lower inflation data that indicated to investors that the SARB would very likely keep rates unchanged from previous today. The rand strengthened to R14.7516/$ just after midday, but quickly bounced off this level as dollar demand picked up on the back of global factors supporting safe-haven flows. Our local unit ended the session weaker at R14.9797/$

Local producer price inflation will print just before midday, and the SARB’s interest rate decision is expected out in the afternoon. Reuter’s poll forecasts that interest rates will remain unchanged, with the repo rate anticipated to print at 3.5%, an expected positive for the rand.

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.