And welcome to another issue of our Weekly Rand Review.
What a week, with SARB's second rate cut, to the US dollar hitting 13-month highs, and geopolitical tensions reaching fever pitch, the past few days gave us enough volatility to keep even veteran traders on edge.
Add to that inflation dropping to levels not seen in years, and crypto markets adding their spice to the mix, and you have all the ingredients for a humdinger of a week — which it was!
The Rand navigated these choppy waters with surprising resilience, proving once again that local factors can sometimes outweigh global pressures.
So sit back and relax, while we give you some insights into how things played out...
So sit back and relax, while we give you some insights into how things played out...
Key Moments (18 - 22 Nov 2024):
Some of the more significant headlines and events over the past week:
- SARB Strikes:Second rate cut disappoints, taking rates to 7.75%
- Inflation Cheer: Local inflation drops to best levels in over 4 years
- Dollar & Crypto Dominate: Greenback surges to 13-month highs while crypto markets continue boom
- Russia/Ukraine Crisis Escalates:Russia reacts to red line being crossed
Monday: Starting Strong
The week kicked off with the Rand opening at R18.14/$, with markets still digesting previous week's moves...
...but by mid-morning, we'd pushed lower to R18.09/$ despite the dollar's broad strength. The afternoon brought more gains as US consumer confidence hitting 112.9 helped risk sentiment...
...pushing us down to R17.94/$ - our best levels in nearly two weeks.
Tuesday: Dollar Flexes
Opening firmer at R17.94/$, any thoughts of a straight-line recovery were quickly dashed, as the market seemed get spooked by the escalation in the Russia/Ukraine conflict...
...as Russia announced that Ukraine’s launching of US and British long-range missiles marked a ‘new phase’ of war, and promised an appropriate response, while lowering their threshold for using their nuclear threshold.
The US Dollar's surge to 13-month highs against major currencies saw emerging markets on the back foot. By 11:00, we'd spiked to R18.17/$ as the greenback's dominance weighed heavily...
...but the Rand fought back gamely in afternoon trade and beyond as it managed to claw back ground to close at R18.02/$.
Wednesday: Inflation Takes Center Stage
Mid-week saw the Rand lose ground from the opening bell, pushing up towards R18.10/$ as the markets awaited the local inflation announcement...
...and what a number it was, with annual inflation dropping to just 2.8%, a full percent lower than the previous month and well below expectations.
Good news right?
Well, it depends which side of the fence you are on, as the market did not seem to think so, pushing the Rand all the way up to R18.18 to the Dollar before it managed to bounce back in after hours trade...
...finally closing around R18.08 as traders positioned for Thursday's rate decision
US Dollar and Bitcoin Ride Wave Higher
And then, in other news:
The US dollar index surged above 108 as the markets continued to digest the implications Trump's emphatic win as well as his various cabinet picks...
...this is its best levels in over 2 years, but if our analysis is correct, we do not expect this to be an extended run higher, but rather the late stages of a corrective move.
Meanwhile, Bitcoin continued to break new records as news came through that SEC chairman had announced his retirement for 20 January (Trumps' inauguration date), with this likely to herald a much more crypto friendly administration.
The gold standard of crypto pushed above $95,000 and came close to hitting the psychological $100,000 level before pulling back.
Last week we gave you some insight to our near term Bitcoin outlook...
...but we also told you that our forecasting model had predicted this rise to above $95,000 when the crypto market was in a deep winter having one of its biggest slumps, way back in January last year...
...with Bitcoin having just risen from a tear-jerking low of $15,479!
As can be seen in our 16 January medium/long term forecast, we showed a minimum upside target of $95,000 (click to enlarge)
Remember, this was at a time when the market was in the depths of despair - which only confirmed us that we were likely right!
And based on our current updated forecast, the next few months could get even more interesting!
Want to see where Bitcoin, the Dollar, Euro and Gold are headed now?
Get our latest predictions here - 7 day free trial
Thursday: SARB's Cut Disappoints
And then came the main event!
Opening at R18.10/$, markets were cautious ahead of the SARB rate decision...
...which when it came, while not unexpected (being a 25bp cut to 7.75%) was nevertheless very disappointing, considering that inflation had now fallen below the 3-6% target band.
This was not something that consumers or businesses need to hear, after suffering under higher interest rates for way too long.
Nevertheless, the announcement triggered some significant moves!
After an initial spike to R18.17/$, the Rand managed to find some oomph, shaking off US dollar strength as it rallied sharply to take the market all the way back to R17.96/$...
...but this was short-lived, as news came through that Russia had fired a hypersonic intermediate-range ballistic missile at the Ukrainian city of Dnipro in response to the U.S. and UK's allowing Kyiv to strike Russian territory with advanced Western weapons...
...with Putin promising more testing of their missiles while announcing that the conflict had now 'acquired elements of a global character'!
A concerning escalation, especially considering the state of flux in the US, with it being almost two months before Trump (who has vowed to end the conflict quickly) gets into his official capacity as President...
...which would excuse one for asking whether Putin is intentionally being provoked to put a spanner in the works?
Not surprisingly, the markets took fright, and drove the Rand all the way back before settling for the day at at R18.09/$.
A volatile day indeed.
Friday: Finding Balance
Opening at R18.08/$, the final session saw two-way action.
Early weakness pushed us back to R18.13/$, but better risk appetite helped us recover, even as the Dollar Index ended the week on a high note, and news of Eurozone PMI falling to 48.1 had limited impact against local positives...
And the Rand even managed a late surge before closing around R18.06/$.
...rounding off a week where local developments managed to offset global currency pressure.
And that was the wrap!
Volatility & Risk Analysis
So, surprisingly, a lot less volatile a week despite all the goings on!
- The Average Daily Range was 18.1c or 1.0% - which still equates to a potential profit or loss of R10,100 every day for every R1 million exposure
- The Weekly Range (total fluctuation) from the highest point (R18.18/$) to the highest (R17.94/$) was 24c or 1.3%. This means by taking action at the right time you could have saved or lost R13,000 for every R1 million exposure...
In order to manage this risk, you need to a) understand how the markets work, and b) have an objective system for timing your hedging and conversions to enable you to:
- Mitigate potential losses and
- Take advantage of favorable market movements.
See below for more....
Want to understand how the market actually works
- and how to use this to advantage?
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"Unpuzzling the Rand eBook" HERE =>
The Week Ahead
This week we have some data releases of interest:
- SA: PPI, Trade Data
- US: FOMC minutes, GDP, Durable Goods
- EU: Inflation
With the US having their Thanksgiving weekend, it could be less volatile at the latter end, but still, do not expect the markets to be any calmer - especially with the ratcheting up of tensions and rhetoric - and actions - internationally.
Which makes it all the more important to have a clear roadmap as to where the Rand and other markets are likely to head...
...as it is at these times that emotions tend to get very much involved in our decisions-making process!
Stay focused, stay informed - and manage your risks wisely!
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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