The dollar index continued to edge higher on the day, rallying on the back of higher yields and risk aversion. The US 10-year and 2-year yields touched a two-year high as market participants expect a hawkish outlook from the Fed. The dollar ended the session firm at 95.732, after testing a high of 95.830 in yesterday’s session.
The euro reacted positively to the German ZEW survey, but it ultimately succumbed to a stronger dollar, dipping to a five-day low on the day. Higher US yields, along with the ECB’s accommodative stance continued to add pressure on the single currency yesterday. The euro fell to a low of $1.1316 and closed out the session at $1.1327, being the biggest loser of the day.
The pound sterling continued to post losses against a stronger dollar, reaching a new weekly low of $1.3573. Even though economic data showed that unemployment came out better than expected at 4.1%, it failed to lift the cable. Brexit, specifically the Northern Ireland protocol is proving to be more of a risk on the cable, along with Johnson’s “Partygate” scandal, which he continues to deny. The pound closed out the session at $1.3598.
The local unit traded on the backfoot for the most parts of intraday trading, coming under pressure to broad based dollar rally, buoyed by rising US Treasury yields. Local upbeat production data, which saw an increase in mining production by 5.2% YoY did little to halt the rand’s losing streak on the day. The local unit depreciated to a high of R15.57/$ and closed the day at R15.5021/$.
On the data cards, locally we have CPI data for the month of December and retail sales. Internationally, we have an array of data from the US, UK, and Eurozone. The rand will likely take its direction from these data releases.
Expected ranges for the day:
- USDZAR: R15.5000/$ – R15.5300/$
- EURUSD: $ 1.1315 – $1.1340
- GBPUSD: $ 1.3585 – $1.3610