Markets WRAP: Rand closes at R13.78/$, day's range between R13.72 and R13.96 | Fin24
 
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Markets WRAP: Rand closes at R13.78/$, day's range between R13.72 and R13.96

2018-11-22 08:22

The rand closed the day holding on to its gains following the repo rate announcement and President Cyril Ramaphosa's cabinet reshuffle.

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Last Updated at 02:06
22 Nov 17:19
The rand closed the day at R13.78 to the greenback, after averaging between R13.72 and R13.96 for most of the day. 

22 Nov 16:50

Lukman Otunuga, Research Analyst at FXTM said, “Buying sentiment towards the South African rand brightened on Thursday after the South African Reserve Bank (SARB) unexpectedly raised interest rates by 25 basis points to 6.75% per year. With inflation still within target and economic growth recently revised lower, expectations were somewhat elevated over the SARB leaving rates unchanged.

"However, although rates where hiked, it was complemented with a dovish touch as the narrative about domestic growth remained downbeat. Today’s move could bolster the Rand’s purchasing power while also encouraging foreign investment –  a step that could be highly supportive to domestic economic growth. The combination of higher oil prices and a weaker rand have stimulated inflationary pressures with inflation expected to increase to 5.5% in 2019.

"A key takeaway from the SARB rate decision is the central bank’s concern over inflationary pressures potentially moving to the higher level of its target band.”


Buying sentiment towards the South African Rand brightened on Thursday after the South African Reserve Bank (SARB) unexpectedly raised interest rates by 25 basis points to 6.75% per year.With inflation still within target and economic growth recently revised lower, expectations were somewhat elevated over the SARB leaving rates unchanged. However, although rates where hiked, it was complemented with a dovish touch as the narrative about domestic growth remained downbeat. Today’s move could bolster the Rand’s purchasing power while also encouraging foreign investment –  a step that could be highly supportive to domestic economic growth. The combination of higher Oil prices and a weaker Rand have stimulated inflationary pressures with inflation expected to increase to 5.5% in 2019. A key takeaway from the SARB rate decision is the central bank’s concern over inflationary pressures potentially moving to the higher level of its target band.”

22 Nov 15:17
SARB has decided to hike repo rates by 25bps, so repo has changed to 6.75% from 6.50% and prime goes to 10.25% from 10.00%. USDZAR traded stronger at R13.80 as the ZAR is still benefitting from better risk sentiment, said TreasuryONE. By 15:19, the rand was trading R13.75 to the greenback.

22 Nov 14:14

Lukman Otunuga, Research Analyst at FXTM has said, "It has been a positive trading week thus far for the South African rand as domestic and external factors supported the local currency. With global risk appetite on the mend after a brutal tech-driven selloff earlier in the week, higher-yielding currencies like the South African rand have scope to extend gains in the near term.

"The main event risk and potential market shaker for the South African economy will be the SARB rate decision later this afternoon. Expectations remain divided on whether the central bank will move forward with raising interest rates, cutting rates or remain on hold. With inflation still within target range and economic growth recently revised downwards, this should be enough reason to encourage the SARB to leave interest rates unchanged or possibly cut rates to help domestic economy.

"However, the prospects of higher US interest rates are poised to fuel fears of capital outflows – ultimately offering SARB hawks a strong enough argument to hike rates in an effort to defend the rand. Technical traders will continue to closely monitor how the USDZAR behaves below the 14.00 support level. Sustained weakness under this level could open a path to 13.80. 

"Any hope for Sterling to recover? The horrible combination of Brexit-related uncertainty and political risk in the UK have offered nothing but pain to the British pound. There is a sense of anticipation mounting ahead of the Brexit Summit on Sunday where UK and EU leaders are due to approve and sign off the drafted Brexit deal. Even if a breakthrough is achieved with the EU, the next major obstacle will be for the draft Brexit agreement to be passed through parliament. With pessimism in the air over parliament approving any deal Theresa May brings forward, fears of a no-deal Brexit scenario are poised to intensify. With Brexit uncertainty and political instability both attacking Sterling from different directions, is there any hope for the currency to recover? The GBPUSD remains bearish on the daily charts with 1.2680 acting as the first point of interest. Commodity spotlight – GoldOngoing trade tensions, slowing global growth fears and Brexit developments have provided Gold bulls with enough ammunition to maintain some degree of control. Although an appreciating dollar and expectations of higher US interest rates will continue weighing on the yellow metal in the longer term, the near-term outlook points to further upside. Technical traders will continue to closely observe if Gold is able to secure a daily close above $1228. A daily close above this level may encourage a move higher towards $1240.


22 Nov 13:05
TreasuryONE has said that positive comments around the future trade agreement between the EU and UK have boosted both currencies. "The USD has been under pressure since then with the EUR/USD trading back around 1.1430 and GBP/USD breaking abouve 1.29. This helped the cause of emerging markets and the ZAR tested R13.86/$, currently back above R13.90." By 13:05, the rand was changing hands at R13.89.

22 Nov 10:17

Andre Botha, Senior Currency Dealer at TreasuryONE said in a morning note to clients that, “The rand broke through the R14.00 level and more significantly closed below that level yesterday, which means that the break was sustained. The rand probably enjoyed some positive sentiment from two fronts.

"One front is the US dollar slipped again yesterday on the back of the market questioning the Fed's gradual hike stance yesterday and the second front that the market is probably showing its hand with what their thoughts are [in terms of what] the MPC will do today.

"Speaking of the MPC, they have the South African interest rate decision today, and from what we can gather is that the rate decision will be a tight one, with the market having a slight bias to a rate hike. What makes the decision more interesting is that the inflation number yesterday printed lower than expected which will be one of the cornerstones of the MPC's decision.

"Should the MPC decide not to hike rates, we could well see the rand above the R14.00 level. With the US out of the market today celebrating Thanksgiving, there will be a drain in liquidity which could mean that the rand hardly reacts today or should there be an event that surprises the market, we could see a knee-jerk reaction. The surprise will be if the MPC does not hike interest rates today.”


22 Nov 08:24

All eyes on SARB interest rate 

"The rand is giving another stellar performance as we gear up for the interest rate announcement due today from the SARB.

October inflation accelerated to 5.1% from 4.9% and, while the number still remains within the target range, all technical aspects point to the need for the SARB to start acting against inflation now. 

The weakness displayed by the dollar and sterling in recent days is also helping the rand to maintain its ground. While we have struggled to really see momentum past the R13.93/$ mark, the rate announcement could break the resistance at this level which could take the rand to renewed highs. 

The expected range for the day is creeping firmer at R13.85 to R14.10." 

- Bianca Botes, Peregrine Treasury Solutions


22 Nov 08:24

Asian stocks mixed after US gains; dollar slips

Stocks in Asia traded mixed on Thursday after a modest rebound in technology and energy shares underpinned gains in US equities.

The dollar slipped amid debate about the Federal Reserve pausing interest-rate hikes in coming months.

Equity benchmarks swung between gains and losses with volumes subdued after their US counterparts closed higher in light pre-Thanksgiving trading. Japanese and Australian stocks climbed while Chinese and Korean shares fell. Trading volumes were below average in Asia given the American holiday later today and one in Japan on Friday.

Oil traded below $55 a barrel as an increase in American crude inventories added to the bearish sentiment with another tweet from President Donald Trump calling for even lower prices.


22 Nov 08:24

Tokyo stocks open higher after Wall Street bounce

Tokyo stocks opened higher on Thursday as investors took heart from a slightly cheaper yen and a rebound in US shares.

The benchmark Nikkei 225 index was up 0.39% or 84.43 points at 21 591.97 in early trade, while the broader Topix index was down 0.27% or 4.40 points at 1 620.29.

The dollar edged up to ¥113.10 in early Asian trade from ¥113.04 in New York.On Wall Street, share prices recovered as the technology sector ended a two-day haemorrhage, although analysts said the respite may be temporary.


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