Welcome to another issue of your favourite Weekly Rand Review.

As August drew to a close, the South African Rand found itself on a firm footing for most of a choppy week, reaching levels not seen in over a year.

But its journey wasn't without its ups and downs, influenced by a mix of domestic news and global economic trends...

...from Eskom’s latest briefing to key economic data releases across the globe.

But, as we have come to expect, the Rand could not hold onto its gains...
...and dare we say, our forecasting system saw this coming (once again).

Let’s dive into some of the details and what it means for you going forward.

Key Moments (26-30 Aug 2024):

To give some of the key headlines and events over the past week:

• Rand Hits 13-Month Best: A surge in risk appetite and local economic optimism pushed the Rand to its strongest levels since mid-2023, but it could not hold on....
• Eskom's Strategic Summer Outlook: South Africa’s power utility outlined its summer plans, instilling some confidence in energy stability, which is crucial for economic stability and investor sentiment.
• Mixed US Economic Signals: The US saw a drop in consumer confidence but a rebound in Durable Goods Orders...but was it healthy?

The Rand began the week at R17.68 against the Dollar, after another impressive week's performance, and of course it was a question as to whether it could capitalize on the gains it had made in the days ahead.

Fortunately, we and our clients had a heads-up from our forecasting system, which indicated that sentiment was expected to drive the market to new lows in the 17.67-17.2 area before reversing...as can be seen below:

(enlarge here)

It was going to be fascinating to see how this all panned out...

And initially, it didn't look to good...

...the Rand opened around R17.68/$, but almost immediately thrusted higher in early trade, as the market touched R17.83 in late morning trade before pulling back to close back around R17.70 to the US dollar.

The market seemed to take some courage from Eskom's media briefing on Monday, with hopes of a "load shedding free summer" if it managed to keep unplanned losses at power stations below 13 000W, with a worse case scenario of Stage 2 if this was exceeded.

Admittedly, the past few months have been a welcome change for Saffers in general, and business in particular, but it remains to be seen whether the bloated state-owned entity can become a reliable provider of energy over the medium and long term...
...especially given the level of incompetence and corruption, and lack of maintenance that has plagued this behemoth the past couple of decades!
And by the way...do 'unplanned losses' mean that there are also planned ones??

Anyway, enough of that...
Tuesday saw the Rand showing some fluctuation again, reaching a high of R17.80/$ before pulling back, as weaker-than-expected US consumer confidence data added some pressure on the US dollar and gave some support to emerging market currencies, including the Rand, which managed to close back around R17.68 to the greenback...
...in so doing, coming tantalizingly close to our target area, but not close enough to really validate it.
Wednesday was marked by increased volatility, with the Rand under pressure from the get-go, and continuing through the SA session and beyond, as the USD/ZAR reached a weekly high of R17.85 during the day before closing out around 5 cents stronger.

The dollar was boosted by a better than expected rebound in US Durable Goods Orders, which rose 9.9% in July after a 6.7% decrease in June.

But the question must be asked - has this been healthy buying?

From the below chart, it would not seem so...

And as can be seen, the past 3 years of consumer purchases has not all been healthy buying, with plenty buying on credit, consumer debt having risen by 45% since 2021...

...and currently totalling almost $1.1 trillion dollars!

Staggering numbers...

In other news:

• Stock markets continued to recover on Wall Street, with the Dow Jones hitting new all-time highs, as did the German stock index DAX.

  This points to more upside ahead in the coming weeks, but don't expect it to be one way traffic - or for this to last for ever. The big one is not too far off!

• Concerns about China’s struggling property market continue to loom large, affecting global economic sentiment, as attempts to stabilize the market following the Country Garden and Evergrande debacles, with latest data showing property investment falling 8.5% year-on-year.

  The potential spillover effects on the global property market and lending sector continue to hang over investors and bankers alike.

Thursday was comeback day for the the Rand as it managed to turn things around, driving the market all the way back down to retest the R17.67/$ level...
...but once again it could not break lower into our target area, but bounced higher before ending the day in after hours trade to close around R17.70 to the US$.
But the Rand was finished quite yet, as it looked to end the week with another flurry, pushing its advantage home, and finally breaking lower to hit R17.59/$...

...its best level against the greenback in 13 months!

But then it all unravelled rather quickly...
...as the Dollar turned things around, pushing the Rand all way back up towards R17.85 (the high of the week).
And in so doing, perfectly validating our forecast of the previous week (see chart above)

...Always nice when this plays out as well as anticipated!

Weekly Wrap-Up & Risk Analysis

It is one thing to enjoy our Rand Review, look at the Rand's gyrations and to appreciate what is happening to drive the market...
...but have you but the Rand's volatility during the week into a quantifiable risk?

The USD/ZAR was less volatile than it can be this past week, but we still saw:

• An average daily range of 16.8c or 0.95%
• A weekly range of 25.7c or 1.46%

What does this mean for exporters, importers and individuals with Dollar exposures?

For every R1 million exposure, these fluctuations mean a potential forex profit or loss of around R14,600 over the week and R9,500 on any given day...
Have an exposure of R10 million? Multiply that by 10...

These numbers are significant, especially for those in business who are directly impacted by exchange rate movements.

Hence the importance of having a roadmap that can help you make the right decision at the right time - at a fraction of the cost of your risk!

The Week Ahead (2-6 Sep 2024)

Looking ahead, the start of September brings several critical data releases.

The US markets will be quiet on Monday due to the Labor Day holiday, but attention will quickly shift to key reports, including the ISM Manufacturing PMI and the always-anticipated Non-Farm Payrolls. These releases will likely influence both the dollar and, by extension, the Rand. In Europe, updates on PPI and GDP growth will be closely watched, offering further insights into the region's economic health.

But as always, we’ll be here to guide you through whatever lies ahead.

Until then, keep your wits about you and stay informed!

Are You You Taking Action At The Right Time?

To give you a little helping hand, feel free to take our Rand forecasting service for a test-drive!

This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.

Simply use the link below to get access now.

This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.

No charge. No card. All yours to trial for 14 days.

If you have any questions or feedback, please leave them below.

To your success~

James Paynter

P.S. Worrying about how to in manage your Rand exposures this year? Email me or give me a call on (041) 373-6310 or (087) 551 2848 - we would love to help.

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