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Cape Town – While the rand opened strongly at under R14 to the dollar on Monday, it will likely straddle R13.80 to R14.40 as the week wears on.
That’s the call by RMB analysts Nema Ramkhelawan-Bhana and Ilke Van Zyl on Monday. “Much of the rand’s impetus will be gathered from global happenings, with little to sway the unit locally this week,” they said.
The rand came in for extra attention as the trade balance number was better than expected last week, according to Umkhulu Consulting’s Adam Phillips.
So far, South Africa has exported R556.41bn worth of goods in 2016, which is 11.3% more than the exports of R499.79bn recorded in January to June 2015.
“June’s hefty trade surplus propelled the year-to-date balance to R12.5bn from a deficit of R22.9bn in 2015, reinforcing our view of medium-term rand strength despite anticipated local and global event risk in the third quarter,” said Ramkhelawan-Bhana and Van Zyl.
“I mentioned that if yield players could get it below R14.00 that it would come off quickly and importers backed away until some support came in below R13.90,” said Phillips on Monday. “We are now back at levels last seen in early November.”
“What is going on at the moment clearly does not help exporters, as the sharp movements we have seen in the last eight months make it very hard to forecast a reasonable level at which to pitch prices,” he said.
“Technically, the rand looks like it could strengthen some more and is moving in tandem with the other majors and commodities,” he said. “It is hard for exporters at the moment, but importers need to be careful here and keep buying as it comes down.”
Phillips said the manufacturing PMI results on Tuesday will probably be ignored, as the market will wait and watch for the local government election results.
However, RMB said it believes the election results “are unlikely to derail the rand”.
It said manufacturing PMI for July is expected to show some weakness after a short-lived rebound in the second half of 2016, which was supported by pre-emptive production ahead of strike season.
“Vehicle sales for the same month will remain in steep contraction, reminding us of the absent demand pressures in the SA economy, while electricity production and Sarb gross reserves data are up for release later this week,” it said.
