A week of mixed movement for the South African Rand

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This week, we watched the South African Reserve Bank (SARB) hold firm on its monetary policy, sending ripples through the market. But that was just the warm-up act. As the week unfolded, we saw Eskom’s debt woes cast a long shadow, retail sales numbers gave us a glimmer of hope while the European Central Bank (ECB) threw a spanner in the works. More Middle East drama unfolded but the rand showed its resilience through it all. The local currency still ended up taking a bit of a knock as it ended the week at R17.54 against the US Dollar, 17 cents higher than it opened on Monday.

The rand opened at 17.37 against the greenback, as traders positioned themselves ahead of SARB’s monetary policy review. Throughout the morning, we saw the USD/ZAR pair hovering between R17.35 and R17.38. But as the day wore on, volatility and speculation began to build, which saw further weakening in after-hours trade before the rand found some fight to close the day at R17.52. Tuesday’s data from the SARB showed that inflation is steadily going back into the desired range of 3 – 6% and that interest rates will be lowered slowly. News which did not change investor prospects much and saw further rand losses to end the day.

Wednesday was dominated by news that Eskom is owed R85 million by municipalities and they propose a 36% price hike to make up for the deficit. Reports from the Middle East also saw investors flocking towards safe-haven assets, as shown by gold and US stocks hitting all-time highs during the week. This contributed to the weaker rand and other riskier assets dropping in demand.

Thursday was a major day for volatility as the ECB announced a higher-than-expected interest rate cut from 3.65% to 3.4%. Major currencies such as the USD and Pound got stronger, and the rand went as low as R17.80 against the USD. The week ended with some fightback from the local currency to save the overall loss for the week to just 17 cents against the Dollar.