Week Ahead: Cumulative trade balance to have remained in surplus in the first eight months of the year

21 Sep 2017

Annabel Bishop

Chief Economist

Central bank decisions influenced the performance of the rand this week. Heading into the US Federal Reserve announcement on Wednesday, the rand weakened by 1.3% against the US$.

Figure 1: SA Monetary Policy Committee (MPC) meeting dates for 2017

Rand, currency outlook for the week ahead and foreign flows:

Figure 2: USDZAR
Central bank decisions influenced the performance of the rand this week. Heading into the US Federal Reserve announcement on Wednesday, the rand weakened by 1.3% against the US$. This was directionally in line with emerging market currencies and was linked to the appreciation in the US$ index.  The Fed confirmed it would begin normalising its balance sheet by reducing bond reinvestments and signalled another increase in interest rates in December. However, post Wednesday’s FOMC the US$ has pared back some of its gains which has been reflected in a recovery in emerging market currencies. Concurrently, the SARB left its policy rate unchanged on Thursday, in contrast to market expectations of a 25bp cut, which supported further rand strength. Overall, on a five day spot return basis the rand is flat, with a depreciation of 0.15% against the US$ versus last Friday’s levels.  
In the week ahead, the rand is expected to trade in a range of R13.70/USD – R12.70/USD, R16.30/EUR - R15.30/EUR and R18.40/GBP - R17.40/GBP.
Figure 3: Purchasing Power Parity value of the Rand vs USD

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