Emerging Markets on the backfoot

Trade report 30/08/2013

ZAR outlook

USD/ZAR expected range: 10.2700 – 10.4400

The ZAR managed to hold relatively steady yesterday against the USD closing at 10.630.  News that the feared Western military strike against Syria was not imminent, after the UK announced it would not participate in a joint strike, slowed the selling of EM stocks and provided some short term relief to the ZAR.

Local news

Local strike action looks set to continue well into next week which will keep investors at bay.  The government has announced it will not step in to help break the wage negotiation breakdown in the gold-industry.  This combined with the possibility of QE tapering in the near future means that the ZAR is still seen as one of the riskier EM currencies.

International news

Talk of QE tapering by the Fed in the coming months is still on the increase.  This has had other EMs tightening their monetary policies, unlike the SARB which has been reluctant to increase interest rates.  And with the threat of military action in Syria still very possible, EM currencies are likely to stay on the backfoot going into next week.

TODAYS KEY DATA POINTS:

• 06:00 SA M3 money supply y/y
• 06:00 SA Private Sector credit y/y
• 12:00 SA South African budget
• 12:00 SA Trade Balance
• 12:30 US PCE core y/y

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