It was quite a week, and the Rand has absolutely bossed the currency world.
After the public holiday on Monday, we walked in on Tuesday to a market that was in a little state of panic.
US FED chairman Powell had moved on from “inflation is transitory”, to “inflation is less transitory than before”, to “inflation is no longer transitory, to “inflation is a problem and we may need to hike rates at a faster pace then what we said just 2 weeks ago”.
Regular readers will know that we warned about this last year already, but apparently, well paid Central Bankers, with all their advisors and analysts couldn’t figure this all out.
All I can say is – Thank [insert your own deity here] we have the MPC and CB Governor that we do here at home.
Throw in a fair amount of uncertainty regarding the Ukraine war situation, and it’s understandable that Tuesday morning was a little tense WRT: EM currencies and assets. The Rand was close to 15.20 and looking like it wanted to make a move to 15.5000.
Fast forward to Friday morning – and the rand has hammered all comers to the canvas, currently trading at around 14.5300. The USD has been given a bloody nose, The British Pound has been beaten like a drunkard in a Liverpool pub, and the Euro has received the same treatment as Lorena Bobbits husband.
It’s been a spectacular performance – against all the odds. It’s not as if South Africa is in great shape. Let’s be honest, we are not winning any prizes for being in the best shape of our lives. Things are all rather messy on the home front.
It’s a bit like Tyson Fury – in truth the man is hardly the image of a prize fighter. He is rather pudgy around the middle (please don’t tell him I said so), but heavens above …he is unbeatable.
We did highlight a few weeks ago that out trade account performance, and geographic distance to the Ukraine war would offer us some protection against a meaningful “risk off’ scenario.
And so here we are.
Where to from here….?
We have come a long way very quickly, and as the Rand has strengthened, we have seen a growing demand from importers….and so it would not be unreasonable to see a little depreciation as we head into the weekend. Profit takers on any short positions should be active.
But in the longer term, the Rands momentum now seems to be entrenched.
Of course there are a myriad of contributing factors, and it would be foolish to make long term predictions.
For now we can celebrate the Rands outstanding performance. The Oscar for the best supporting actress in a drama filled world, is firmly in the grasp of our sweaty palms. However, there are many usurpers waiting outside the theater.
One thing is sure – were it not for the commodity price boom over the last 2 years things would be very different.