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Rand climbs to 8-week high vs dollar

Optimism around a global recovery from the Covid-19 pandemic boosts riskier assets.
Image: Shutterstock

The rand raced to its highest in more than eight weeks against the US dollar on Tuesday, as optimism about a global recovery from the Covid-19 pandemic boosted riskier assets, with investors looking past Sino-US trade tensions.

At 14:12 the rand was at 17.41 to the dollar.

The currency was at its strongest since March 27.

“The optimistic recovery narrative is holding within markets, keeping the dollar subdued and seeing the rand remain on a stable footing following last week’s rally,” Bianca Botes, executive director at Peregrine Treasury Solutions, said in a note.

“While there are looming geopolitical risks, it seems as though markets are currently pushing them onto the back burner, and will likely continue to do so until there is a new escalation or increased threat.”

Japan’s decision to end coronavirus-induced restrictions and a survey showing German business morale rebounded in May lifted hopes of an economic recovery and helped offset a war of words between Beijing and Washington on trade, coronavirus and China’s proposals for stricter security laws in Hong Kong.

In South Africa, President Cyril Ramaphosa announced on Sunday a further easing of the country’s lockdown from June 1, allowing the vast majority of the economy to return to full capacity.

Read: SA to move to Level 3 lockdown

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Interestingly enough, the ZAR also improved against the BRP and the EUR. I don’t see it as bad thing, but I’m still wondering why? Nothing I see in the SA economy tells me our currency should improve. We were in a recession; we are going into a worse recession (if not a depression), we’re still stuck with Squirrel and friends, we still have severe structural challenges, so absolutely nothing improved. What am I missing? Unless it’s one of those manipulations done only to make money for a few, messing up any value statistics, calculations and predictions might have for the rest of us.

I have posted my evidence of manipulation but conversation here is futile with the delay for ad hoc and unexplained censorship.

Yeah, your cute little conspiracy of manipulating the global currency markets. Lol

Please share link.

….and the interest rates fell…. i would have expected massive capital outflows…. and like you say its still improving.

Batman: my take on it would be the fall in Rand was hysterically overdone and this retraces, not looking for good news or reason for strength. Below 16 is quite possible barring some global calamity, then the herd runs back to dollar again

Great news, older people will have to be more careful now when going out due increased spread of the virus.

Also mentioned as applicable for Level 3:
“People from 60 years of age and up, as well as those with conditions like heart disease and diabetes, are encouraged to self-isolate and only leave home for exceptional reasons.”

Logic would have any sane person understand that once those at risk have been secured then there is nothing further to pursue.

Logic would have any sane person determine the nature of the vulnerability of seriously ill victims so as to refine the warning to those potentially at risk of serious illness.

Logic would have any sane person pursue and evaluate all possible treatments without myopic bias towards to any non existent vaccine.

Logic would have any sane person advise the public on how to maintain a healthy immune system.

Logic will never win against insanity when personal gain is involved.

Old South Africans and logic go together like military and intelligence. Remember who brought you this legacy that you now live in.

Let us not even consider the blatant synchronized intervention that has seen the Rand immediately strengthen in the face of a rate reduction and be repeatedly pushed back when natural weakening has occurred. Always jump to the manipulators fake narrative. Did anyone see how it also defied its US Dollar Index master from the moment that the rate reduction was announced? See here: https://jsecharts.blogspot.com/2020/05/usdzar.html

You are not missing anything.

Nothing moves in a straight line up or down, buying and selling extremes exhaust themselves, as does panic and euphoria. Ask yourself a simple question, if on the 1st Jan when the ZAR was around 14.00, i told you the ZAR would be 17.40 before end of May, likely you would have thought it was far fetched and that the ZAR could never plummet like that so quickly, barring Des van Rooyen being reinstated as finance minister.

However, it hit 19.35 in the panic. The ZAR pulling back now is part of the global ‘risk on’ move in all markets, as the euphoria (horrifically misplaced) keeps building, the global sheep are celebrating being given back some of their freedoms … so i see nothing out of sorts with the ZAR retracing 50 or even 60% of its move. The euphoria like the panic will end, in my opinion likely quite soon.

The next panic phase of this insane and totally unnecessary lock down will then start to emerge. Denial will end and some truly staggering economic numbers will start to come out. As these are digested globally and especially in RSA, there will be a short sharp realization of how bad it is. I watch polls in the UK and interviews of idiots, on government subsidized furloughs, with no will to go back to work, assuming that everything will go back to normal after covid lock downs end. They do not realise that when the government subsidy stops that a very large number of furloughed employees will get a retrenchment mail. We are headed for unemployment on a global scale that will exceed the great depression – with that will come hundreds of millions of defaults on car loans, over drafts, credit cards, mortgages, business loans etc. Millions of businesses and hundreds of millions of jobs will simply vanish, they cannot and will not re-open. If they reopen it will likely be short lived in many industries, as the new normal will not be enough to break even.

The knock on effect will be banks crumbling all over the world – beware of bail ins. This is the largest deleveraging in human history and it is self inflicted – astounding. Commercial and residential property values are collapsing – those that make it through this, are they really going to buy that larger house or get a new car now, get the latest flat screen or the new play station. Disposable income if there is any will be saved, not spent in restaurants, movies, coffee shops etc.

So in my opinion the ZAR is taking a breather and rebounding, look at global stock markets and other EM currencies, same story. RSAs economic fundamentals were shocking in January and we were headed at best for minus 3.5% GDP in 2020 before covid. The underlying economic fundamentals are now orders of magnitude worse. Let us not forget 75,460 troops are deployed until at least the 26th of June – why?

When the global ‘investment markets’ switch abruptly back to RISK OFF in the coming weeks and months. Then i expect the ZAR to start reflecting the underlying real fundamentals. Likely 19.35 will be considered as a point when the rand was relatively strong a year or 2 from now. Let us hope the coming civil unrest is not excessively violent and that it is managed as responsibly as possible. It will be difficult with 3m+ job losses and a GDP approaching minus 20% this year.

Expect a retest of the lows in all markets i believe in the next couple of months and even new lows in some markets. This will come in waves through year end and into 2021.

Equities will have their time in the sun again – but that will be as a result of negative interest rates, bank bail ins, sovereign debt crises and the rushed move to digital currencies. The move into equities will have nothing to do with fundamentals or valuations, just capital flight to safety. Watch the EU, as they will be the first domino to fall in the sovereign debt markets – when they go EMs will be next.

Just my opinion, maybe i will be totally wrong, if so i will lose a lot of money, as our long term strategic planning is built around this.

I remember doomsdayers calling the ZAR to 20 in 2003. For now Fed is pumping USD into the market. ZAR should actualy be even stronger.Agree with your comments. Next panic and with our growing economic problems it will hit 20.

Hi Romulus—like your comments as I believe most to be correct although one cannot always see inside the crystal ball; especially where the Rand is involved. Would you sell out of a highly profitable offshore USD fund now or hold on for a possible late 2020 weakening of the Rand. Some say take profit others mainly advisors say hold your positions. What’s your take on this?

It is very difficult to comment without knowing a big picture view. Every individual is different and has different risk profiles.

The USD fund is highly profitable, from a USD perspective i assume, or from a ZAR perspective. If it is still in good shape after the recent sell off in real USD terms then it is well balanced and must be hedged.

From your brief comments it sounds like you want to potentially cash out and convert back into a weak rand. If you need to do this then by all means, i do not think you will have to wait that long for it to be back in the 19.00`s, probably the low 20.00`s. However, if this is an investment that you do not need back in RSA, why bring it back at all. There will in my opinion be a retest of the March lows in the weeks ahead, if you are worried about this and affecting the value of your fund, by all means sell it, but i would hold it in cash $$$ and reinvest when there is blood in streets, or wait for what looks like a sustainable bottom is in.

We are only just starting a global economic crisis that will likely be very bad for the next 2-4 years, maybe longer. I would personally keep only the rands i needed in RSA – during this period the ZAR is far more likely to see 30.00 than 10.00 or 11.50 again. By all means taking some profits is good, on spike lows above 19.00/ 20.50/ 21.00/ 23.00 … if it gets there on this next run.

The SA economy was a train wreck before covid, now it is shocking having endured 70 days of lock down – likely 120/150 days before we are at level one.

Disclaimer – this is only my opinion.

Some good points, but you must remember that everything is relative.

What will happen next ? Inflation/deflation. You say negative interest rates , where ? In SA? I doubt it.

The civil unrest , yes it’s possible. People will starve. Interestingly there are 11m people that came into SA legally and havent left (from the rest of Africa) , they don’t get grants , they don’t get special cornona top ups. How will they survive , some of these people work much harder than some of our local labour.

The next 5 years or so will be very interesting

Negative rates never in SA. I think even globally we are nearing the end of negative rates. QE in the EU has been a catastrophe. There will likely be some spike lows in yields even into negative territory as money flees Europe. I think this meltdown/ lockdown will have likely wiped tens of trillions of $$$ off the global economy, from property values to asset prices everywhere – but government debt is the bubble we must all fear popping. The warning signs will be the inexplicable, fundamentals considered surge in stock prices in the coming several months.

I am sure you saw the spike in overnight rates to over 10% in the USA last year Septish – the whole world shuddered for a few days, that’s a taste of the future. Imagine if the repo rate can do that in the USA, what will happen when the bubble bursts in the EU and then look at rates in the EMs. I used to trade bond options on the R150 through SG in Jhb many moons ago, i remember sitting on a basket of put options with way out of the money strikes when they deployed Tito, rates literally exploded and doubled if i recall in a very short period of time – it was a very memorable hedge.

Inflation/ Deflation – neither. We should have massive deflation. No governments on earth can print enough to create inflation. Complete supply chains have been destroyed in this lock down, crops, mines, all sorts of manufacturing … as such i believe there will be shortages, which will reflect in inflated prices of goods, but simultaneously with hundreds of millions of lay offs globally and all the unrest, poverty and crime that goes with it – sad but i think true. So i guess this would be an ugly hybrid type of stagflation.

You are right, i also believe the population is closer to 70m not 60m. Xenophobia will be extremely bad in the coming year or 2 and beyond in my opinion.

My 2 cents.

The markets have been rigged by the new money powers for so long that it should be common knowledge by now. The timed attacks are notorious. Every intervention is an abuse of trust and someone loses so hard that they never return. And so the monopolies grow and the megalomaniacs become even greater threats. But if the reality is too much to contemplate then sure we can agree with their fairy tales about why things are happening and go like lambs into their abattoir.

It makes sad when an old man, type gibberish. Simple if you don’t like what is happening in the country by all means go and don’t whine. This is sick, everyday complaining about this and that ANC, DA, EFF,FF plus they are all same bag of potatoes with different branding, be the change you want to see in the country and work together for the better future of our children or leave. I am doing it and I love my country.

The calm before the next storm…

“At 14:12 the rand was at 17.41 to the dollar.”
Now,if that had read: – “At 17:41 the rand was at 14:12 to the dollar.”,THAT woulda been sumpin’❗

End of comments.

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