International

The dollar was weaker in early session trade on Monday, the dollar index touching its lowest point at 90.683 since early March as investor doubt about the Fed hiking rates increased. The dollar index managed to bounce off Monday’s low’s yesterday to trade slightly firmer at 91.068 against a basket of six currencies, despite doubt over US interest rates. Focus goes towards tonight’s US Fed policy statement where rates are expected to remain unchanged. The dollar index closed off Tuesday’s session at 90.876.

The euro was weaker over the past two days as investors partook in profit-taking on the single currency after recently crossing the $1.2000 threshold. The euro still trades firm despite marginal retracement of gains, sentiment may be weighed by tonight’s US Fed policy statement, but there may not be any changes as no change is anticipated. The euro closed out Tuesday’s session at $1.2090.

The pound traded the entire $1.3850 – $1.3950 range over the past two days, with the challenge being remaining above the $1.3900 resistance level as political uproar over Prime Minister Johnson’s disputed comments on not imposing a needed lockdown, rather letting UK residents succumb to COVID-19, sullied sentiment. The pound still trades firm, but investors still await the Fed’s meeting for direction. The pound closed Tuesday’s session at $1.3906.

ZAR

The South African rand lacked conviction and direction again on Monday, trading the better part of the session flat, with strengthening bias, as traders were folding their bets ahead of the national holiday. Yesterday our local markets were closed, in celebration of Freedom Day, although trading activities in other markets outside South African saw the rand retreating to end the session weak on the day. A weaker dollar, improving global economic prospects, along with growing demand for EM assets continue to underly the rand’s broader strength. The local unit ended the session at R14.2722/$ on Monday, and at R14.3629/$ on Tuesday.

Locally we are empty on the data front today, and internationally we are awaiting the Fed’s rate decision in the US, which will most likely influence price direction for USDZAR and other asset classes.

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 US dollar continued on its path to recovery yesterday, almost getting back to where it was before Monday’s big fall. Recent strength on the greenback stems from risk off sentiment in markets as well as better than expected jobless claims data yesterday, indicating a recovery in the US jobs market. President Biden’s new capital gains tax proposal also aided the dollar in late afternoon trade yesterday. The dollar index reached a high of 91.419 ended the session at 91.333.

The euro fell during yesterday’s session as a result of a stronger dollar. Before the turnaround in late afternoon, the common currency had initially strengthened ahead of, and after the ECB’s policy decision where they decided to keep rates on hold. Although the euro briefly dipped below $1.2000 and reached a low of $1.1994, it pulled back and closed the day at $1.2015.

What goes up, must come down and yesterday Pound Sterling proved this as it successfully wiped the large gains made on Tuesday from the board. Where the stronger dollar was the initial driver of the move lower, it was the diminishing advantage that the UK has on vaccine rollouts that added to the decline as Europe catches up with faster rollouts and additional doses. The pound reached a low of $1.3824 and ended the day at $1.3839.

ZAR

The rand saw marginal declines yesterday, retreating to trade above R14.30/$ as delays in global vaccine distribution has uncertainties creeping back into the market. With significant currency moves on the back of yields, investors still await direction from major economies as interest rates continue to take focus, despite the ECB keeping rates unchanged last night. The rand closed us off just shy of R14.30/$ and R14.2941/$.

With no local economic events out today, expect global factors to drive market 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.