Publications
Partners
Cape Town – The rand surprised the market with a strong rally this week and is now sitting at R13.50 to the dollar by 10:20 on Thursday.
“We had a strong rally in the local bond market yesterday, the Business Confidence Index was the best for four months and the rand just keeps rallying,” Umkhulu Consulting analyst Adam Phillips said on Thursday.
TreasuryOne’s Andre Botha said the rand “surprised most of the people in the market with its strong showing in the past few days”.
“While it is not a Rand specific thing, we are enjoying the sentiment at the moment with emerging markets on the front foot.”
He said the decision on Thursday from the European Central Bank could drive the US dollar down should it decide to taper some of its quantitative easing programme.
“The rand can benefit from this (as the) … dollar can weaken, but the euro will be higher than current levels should that be the case,” he said.
“The rand feels like its running out of steam and gains could be harder to get as we head to the critical level of R13.30.”
Phillips said two things are certain in early 2017: Dollar strength and US growth.
“This might only come through in mid-January for those that are patient,” he said. “For importers, I would let the forward point dial down before buying unless you have some spot buying to do.”
The rand’s strength comes as the FNB/BER Consumer Confidence Index (CCI) recovered to -3 in the third quarter.
“Although -3 is the highest index number since the fourth quarter in 2014, consumer sentiment remained well below the long-term average reading of +4 for the CCI,” FNB said in a statement on Thursday.
"A confluence of adverse economic developments over the last year and a half has put many South African households under financial strain and knocked consumer confidence levels to near record lows (-14 in 4Q2015),” said Jason Muscat, senior economic analyst at FNB.
“These include an alarming deterioration in domestic economic growth on the back of weak global demand, subdued commodity prices, increased political uncertainty, social unrest and the devastating impact of the widespread drought; a stagnation in public sector employment; a dramatic depreciation in the rand exchange rate; soaring food prices and a slump in credit extension."
