It’s been an active week for US fighter pilots as they’ve shot down another three “objects” since the very public downing of a Chinese spy balloon last weekend.  The US does not know how these other objects stayed in the air (they weren’t balloons) or where they came from, and with typical drama the commander of US airspace defense has not ruled out alien or extra-terrestrial origins. 

These are the mid rates at 7:20 today:

USD = R17.97 AUD = R12.46
GBP = R21.72  DXY = 103.75
EUR = R19.19Brent Crude = $85.35 per barrel

Market News

  • Our exchange rate is looking somewhat stratospheric with a move above R18.00 to the Dollar just around the corner.  Friday saw us slide despite Dollar weakness on the day, and to make matters worse the Dollar is on the front foot today which has taken us to R17.96. 
  • Friday was another frustrating one for the Rand as we suffered from local developments when we should have been eking out gains against a softer Dollar.  Cyril Ramaphosa tried to assure us that there is a credible plan of action aimed at dealing with our electricity crisis, but other than declaring a state of disaster while also announcing that a Minister of Electricity will be appointed the plan was very light on actual detail.  The market was unimpressed, and the Rand fell to R17.90. 
  • The following is from a Business Day article which underlines how Eskom is impacting the Rand:  The Eskom risk premium is in full force for the Rand. The Rand is down 4.7% this year, while most of its peers are firmer, with Chile’s peso racking gains of more than 6%. “Since the start of the year, the Rand has been one of the worst performers in EM,” said Daria Parkhomenko, an FX strategist at RBC Capital Markets in a note to clients. “We think that a key driver of this has been the Rand carrying a risk premium for the worsening power situation.” 
  • Our slide on Friday was entirely of our own doing as the Dollar gave up ground against other currencies on the day.  The US weekly initial jobless claims report came in higher than expected on Thursday, a result that the FED is trying to achieve, while FED member Thomas Barkin said that tighter monetary policy is “unequivocally” slowing US economic activity while allowing the FED to act “more deliberately” with future rate hikes which suggests a more considered approach.  The Dollar Index moved lower on Friday as a result, but unfortunately we could not capitalise.   
  • The week ahead will have exaggerated moves in the currency market and hopefully that will be a much weaker Dollar that’s too difficult for our rate to ignore, although a stronger Dollar cannot be ruled out.  We don’t have long to wait as the main event comes tomorrow afternoon.  All eyes are on the January US inflation report, and from the Rand’s perspective we hope that the FED’s “disinflation” narrative is supported by a number much lower than December’s 6.5%. 
  • The following from Reuters talks to a stronger Dollar as the market frets about a hotter CPI number than forecast:  The Dollar hovered near a five-week high against major peers on Monday on rising bets for prolonged FED policy tightening ahead of a crucial consumer price report the following day. “The Dollar has been well supported since the much-stronger-than-expected US jobs data earlier this month, and FED comments have leaned more to the hawkish side, but of course the focus is tomorrow’s CPI,” said Shinichiro Kadota, senior FX strategist at Barclays in Tokyo. “I think the market is more worried about upside risks to inflation, rather than downside risks.”
  • No local market data today.
  • Possible USD mid rate trading ranges in the Rand today are R17.80 and R18.10. 
Posted in