The Daily Forex Market Report

Good morning

With all the focus on US monetary policy and what that means for the Dollar, yesterday was a timely reminder that support for the Rand can also come from the East. The good news is that we could see even more support later in the week.

These are the mid rates at 5:45 today:

Market News

• After barely moving all of last week the Rand got the new week off to a very good start yesterday.  We opened at R18.05 to the Dollar before trading progressively stronger to touch R17.73 as the day’s best level late on.
• While most analysts assured us that Wednesday’s US CPI reading is the only game in town it didn’t take long for that theory to be blown out of the water, at least as far as the Rand goes.  Recently, China has held meeting after meeting tasked with tackling their ongoing economic woes. Still, until yesterday very little new information has been given about actual plans to stimulate their economy.  This changed as their senior decision-making body adjusted the wording around monetary policy for the first time in 14 years by removing the word “prudent” and replacing it with “appropriately loose”, a move that opened the door for more assertive action aimed at bolstering their economy.  The Rand loved this development and we registered healthy gains on a day when the Dollar Index was also on the front foot.
• The following is from CNBC, and you can throw the Rand in alongside the Aussie and the Kiwi Dollars as proxies for positive China news:  The Dollar was up slightly in skittish trading on Monday as investors awaited US inflation data later this week, while the Australian and New Zealand Dollars rallied after China pledged an “appropriately loose” monetary policy next year. China will adopt an “appropriately loose” monetary policy next year as part of steps to support economic growth, and will implement a more proactive fiscal policy and step up “unconventional” counter-cyclical adjustments, state media reported on Monday, citing a Politburo meeting. “This is a market right now that wanted to hear good signals about global growth, and so it’s found receptive ears,” said Adam Button, chief currency analyst at ForexLive.
• Yesterday was a great start to the week and there’s a chance that further good news from China could come as soon as Thursday or Friday.  Their closed-door Central Economic Work Conference is being held over those two days, and given the significant step of altering their monetary policy wording yesterday, it is hoped that this will be backed up with further announcements in a few days.
• Turning back to the Dollar we now wait for tomorrow’s US CPI report but the following from Reuters reminds us that there are a few major central banks likely to cut interest rates this week, moves that could strengthen the Dollar Index given that the FED seems to be in no hurry to cut again after next week’s meeting:  The Bank of Canada, the Swiss National Bank, the ECB and the Reserve Bank of Australia meet this week, with deep rate cuts expected from the first two that could turn yield differentials even more against their currencies. “The potential rate cuts by the ECB, BoC, and SNB reflect a significant shift in monetary policy,” said Lukman Otunuga, senior market analyst at FXTM. “Combined with rising political risks and economic data, these decisions could drive substantial currency movements.”
• Local market data sees our October mining and manufacturing stats at 11:30 and 1 pm respectively.
• Possible USD mid-rate trading ranges in the Rand today are R17.70 and R18.00.

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