Capital flight from emerging markets keeps pressure on ZAR

Trade report 30/01/2014

ZAR outlook

USD/ZAR expected range: 11.1900 – 11.3700

In a surprise move yesterday the SARB went ahead and announced an increase in benchamark rates by 50bp to 5.50%.  This is the first increase in rates in nearly six years.  Despite this increase, the ZAR continued to slide as investors continued to sell off emerging market assets.  The Rand was trading at R11.2940/$ at 08:55, only slightly firmer than its close in New York yesterday evening.

Local news

Governor Gill Marcus announced yesterday an increase in interest rates to 5.5% and her comments mentioned that this increase was not in response to Turkey’s aggressive interest rate announcement, but more is aimed at containing inflation.  This small hike will not be enough to make a real impact on the current account deficit and with the SARB citing the downsides risks to growth and not committing to further hikes; the Rand continued to perform badly after the announcement.  News that AMCU has rejected a 9% wage offer from leading platinum producers will further increase pressure on the ZAR today.

International news

Emerging market currencies remained under pressure yesterday as investors continued selling off EM assets after the FOMC announced a further taper by $10bn in its policy meeting last night.  There were no comments about a future taper but the market is expecting the tapering to continue, putting EM currencies in a very fragile position as investors move towards safe haven assets.

TODAYS KEY DATA POINTS (GMT):

• 06:00 SA M3 money supply y/y
• 06:00 SA Private sector credit y/y
• 09:30 SA PPI y/y
• 12:00 SA Government budget balance (ZAR)
• 09:30 GB Net Consumer credit
• 10:00 EZ Consumer confidence (final)
• 13:00   DE CPI y/y (preliminary)
• 13:30 US GDP q/q annualized (advance)
• 13:30 US Initial jobless claims

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