EM currencies under pressure

Trade report 10/01/2014

ZAR outlook

USD/ZAR expected range: 10.7300 – 10.8800

EM currencies have been under considerable pressure this week as the USD has been enjoying a period of strong positive momentum. The ZAR touched a new 5-year low against the USD yesterday, at R10.8330/USD, although this morning has firmed up slightly, but may face renewed pressure later if US non-farm payrolls data comes in stronger than anticipated.

Local news

South Africa’s manufacturing production data for Nov came in at a disappointing 0.3%, down from the prior 1.7%, which is indicative of sluggish growth in the sector.  Better news for the Rand is news that Chinese trade data for Dec shows growth at a 5 month high of 8.3%.  This is encouraging data as China is a key trade partner to SA, although it is too early to speculate if this is sustainable or not.

International news

The upbeat USD has kept EM currencies under pressure this week, and should the US non-farm payrolls also come in stronger than expected it will be fair to expect the dollar positive trading to continue into next week, which will see the Rand weaken further.

TODAYS KEY DATA POINTS (GMT):

• 09:30 GB Industrial production y/y
• 09:30 GB Manufacturing production y/y
• 13:30 US Change in nonfarm payrolls
• 13:30 US Unemployment rate
• 13:45 US Fed’s Lacker speaks on the economic outlook
• 15:00 US Wholesale sales m/m
• 15:00 US Wholesale inventories m/m

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