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ZAR Forex Report - 16 February 2016

After a tumultuous month or two, the Rand finally showed some strength; be it that yesterday was a bank holiday in the US and trading was quiet…

While emerging markets are still under pressure, the ZAR had some pressure lifted on Monday as Asian stocks rallied and the chances of a US rate increase decreased. On Monday, the Rand closed at 15.7218 after opening at 15.8783 against USD.

The Rand has gained almost 3% against the USD in recent weeks after increased business confidence, higher interest rates and better sentiment towards Treasury, and in particular Mr Pravin Gordhan, after the now infamous Nene-gate or 9/12.

At a meeting with Jacob Zuma, the leaders of SA’s biggest companies encouraged the President to sell some of the state-owned assets to private entities in a bid to improve their financial and operational failures. During the annual State of the Nations Address, the President seemed to approve and will “ensure the implementation of the recommendations” – one can only hope the government follows through in what is clearly a desperate attempt to avoid a credit downgrade to junk status.

After the gold price has risen to a one-year high last week, giving SA and the ZAR a lifeline, it slid 2.5% on Monday – the most in almost seven months as global equities edged higher and cut a demand for the safe haven of the precious metal. The increase in the last year in the gold price masks challenges such as lower commodity prices, strikes, mining legislation and, of course, Eskom facing the mining industry.

Global market sentiment is looking positive; at least more positive than the last few weeks, as oil is bouncing back and Asian stocks rallied after a week long holiday - this is positive news for the Rand which will hopefully capitalise and keep the momentum going.

At the time of writing, the ZAR is trading @ 15.755 against USD with support at 15.65. If the Rand starts to weaken, expect it to trigger a few stop losses adding to the slide.

And finally a word on the SONA – let’s just say it failed to impress and all eyes are on the budget speech next week where chances are high that taxes will be increased in an attempt to avoid a downgrade.

Hold onto your seats, 2016 is going to be a tough year for those of us in SA.

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Global Forex Report - 16 February 2016
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