The Rand Report: The rand strengthens as major currencies struggle

Strength and volatility were the main features of the rand this last week. Commodity prices rose significantly, while at the same time there was a significant weakening of major currencies – the USD and EUR cases in point. The weakening of major currencies strengthened the rand this week.

The GBP/ZAR pair opened at 20.51 on Tuesday and broke the 20.67 mark on Wednesday before closing at 20.25 on Friday.

The USD/ZAR pairing experienced significant volatility. The currency pair opened at 15.35 on Monday, broke 15.49 on Wednesday, then dropped to 15.15 on Thursday before closing at 15.45 on Friday. Most of the weakness in major currencies was driven by high inflation and higher commodities prices. The Euro had a similar story. The European Economic Area (EEA) has been particularly battered by high inflation, more so now with the increased oil and gas prices and the economic sanctions against Russia.

‘Risk off’ behaviour was a key factor driving market movement. Investors have been hedging risk through purchasing commodities, especially precious metals, thereby driving their prices higher. South Africa, which is a net exporter of precious metals, has significantly benefited from the rise in gold and platinum prices. This is evident in the fact that mining companies have been the best performers on the JSE this week. However, analysts are concerned that the rise in commodities will exacerbate already high inflation rates and stall global economic recovery from Covid, which will spill over into South Africa.

Upcoming market events

Tuesday 8 March

SA: GDP data

US: Balance of trade

SA: SACCI business confidence data

Wednesday 9 March 

US: JOLTS job openings data

CHN: Inflation data

Thursday 10 March

SA: Current account

SA: Mining production data

SA: Business confidence

SA: Manufacturing data

EA: ECB interest rate decision

US: Inflation data

Friday 11March

UK: GDP data

US: Consumer sentiment data

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