Forex Market Report

Rand strength and Dollar weakness, a beautiful combination that saw the Rand take an impressive step forward yesterday. It would be nice to know that it’s plain sailing for the Rand into the weekend, but the week’s two biggest risk events still lie ahead. 

Market News

• This time last week, the Rand took a tumble to R14.50 to the Dollar and had struggled to make any meaningful recovery since, but that all changed yesterday. We opened at R14.37 thanks to positive local developments and traded progressively stronger from there to hit R14.17 as the intraday best. 
• As was to be expected, the focus was on local suspension headlines with the suspended Ace Magashule stating that he suspends his suspension while also suspending Cyril Ramaphosa. Fortunately for the Rand, the ANC has closed ranks with a short but clear message that Magashule’s suspension stands, and that he must now subject himself to the party’s disciplinary process. The lack of any further fireworks coupled with Ramaphosa consolidating his position within the ANC was welcomed by the market and the strengthened Rand.
• The following is from Reuters: The South African Rand rallied on Thursday as the governing African National Congress (ANC) stood by a decision to suspend one of its top officials charged with corruption. The ANC’s move earlier this week to suspend its Secretary General Ace Magashule, one of reform-minded President Cyril Ramaphosa’s main rivals, has boosted the Rand as it is seen as a sign that Ramaphosa is in the ascendancy in his divided party. An ANC spokesman said on Thursday that Magashule’s attempt to retaliate by suspending Ramaphosa had not worked and that Magashule remained temporarily stripped of his duties.
• Rand strength layered on top of Dollar weakness, with the Dollar Index falling from 91.28 to 90.84 points, secured our outperformance in a basket of emerging market currencies. With the FED standing resolute in their “no policy tightening” message risk appetite will improve with every bit of good news, and yesterday the good news came from US initial weekly jobless claims falling below 500 000 for the first time since the pandemic hit. All eyes will be on their April new jobs data this afternoon, and while some analysts think a massive number will force the FED’s hand. Recent developments suggests they won’t budge and that this outcome will see additional risk-on sentiment, which is Dollar negative. 
• The following is from CNBC and talks to the FED being the primary source of Dollar weakness: The Dollar dipped on Thursday, hitting its lowest point in three days, as global market risk appetite improved and traders looked forward to the April jobs report due on Friday for direction. “The outlook for the Dollar by many right now is that it’s going to be in the house of pain for quite some time,” because for the most part, the markets are convinced that the FED has Treasury yields under control, said Edward Moya, senior market analyst at FX broker OANDA in New York.
• US jobs data is our first hurdle today, and the second could come after the market closes as Moody’s is scheduled to announce our latest credit rating assessment. They are not obliged to speak, and many a Friday night has passed with no announcement at all, but if they do act then the Rand will be hoping that their negative outlook in our current rating will not manifest into a cut to three notches below investment grade.   
• Local market today sees our foreign exchange reserves at 8am with an uptick to $53bn expected. 
• Possible USD mid-rate trading ranges in the Rand today are R14.10 and R14.40

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