Currency outlook for the week ahead and foreign portfolio flows:
The rand commenced the week on a negative footing, continuing to trade at levels over R12.00/USD, after piercing this resistance barrier last Friday (6 April). The weakness stemmed predominantly from global events, including the imposition of sanctions against certain Russian oligarchs; President Trump’s threatening tweet to Russia, in response to Syria’s chemical attack and financial concerns in Turkey. This caused investors to turn bearish against emerging markets, putting pressure on emerging market currencies. Additionally, tensions between America and China continue, however these have abated somewhat as Chinese President Xi Jinping announced important reform initiatives to aid globalisation.
Additionally on the domestic front, the rand was also affected by concerns that the economy’s momentum has moderated somewhat after its steep rebound, following President Ramaphosa’s election as head of the ANC, with recent releases, including the Absa PMI and manufacturing data disappointing.
The domestic currency made some gains later on in the week trading back below the R12.00/USD level. However at the time of writing it had moved up again to R12:05/USD.
In the week ahead, the rand is expected to trade in a range of R11.55/USD – R12.55/USD, R14.36/EUR - R15.36/EUR and R16.70/GBP - R17.70/GBP.
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