The ZAR continued to weaken in the face of a stronger Dollar, rising yields and general Risk off sentiment
The Rand traded to a weakest level of 18.3500 after the Dollar continued to trade higher on the back of hawkish Fed sentiment.
- The ZAR however performing admirably when compare to the Japanese Yen.
- The Yen trading above 150 vs the Dollar for the first time since August 1990.
- The currency losing nearly 30% against the dollar in 2022 due to widening policy divergence.
- The Bank of Japan committed to ultra-easy monetary policy to support the economic recovery,
- while the Federal Reserve aggressively raised interest rates to combat surging inflation.
- The likelihood of a BOJ intervention increasing as authorities remain irritated by the Yen’s devaluation.
- Driver remain : The US 10YT yield trading at 4.25%, the SP500 at 3650 and the ZAR opening at 18.3400,
- All pointing to another session of RISK OFF,
- For all the talk of a FED pivot (i.e. slower rate hikes or cuts in 2023), Fed officials have repeatedly pushed back against this notion.
- With markets pricing in 2 x 75 bps hikes for the remainder of the year.
- Against the back drop, expect Risk to remain under pressure and a weaker ZAR.
Significant Market Data:
- Nothing of significance, although the session once again dominated by Fed speakers.
- The ZAR continues to trade weaker, as global yields continues to rise.
- It is important to note, that markets are not even considering the disaster that is ESKOM,
- And this is purely on the back of US rate policy.
- The FED looking for a neutral rate of 4.75% for Fed funds, that is currently at 3.25% ( so another 150bps).
- NB: This is all inflation dependent and a decline could arrest this move and we could see a Dollar reversal.
- Fed speakers continue to push for higher rates and the ZAR likely to remain under pressure in this environment.
- Trade today : BUY USDZAR on dips.
- USDZAR : Expect a range 18.1000-18.5200
- Importers 18.2400-18.1000
- Exporters 18.3800-18.5200
- EURZAR : Expect a range of 17.8700-17.6700
- Importers 17.8700-17.6700
- Exporters 17.9400-18.1400
- GBPZAR : Expect a range of 20.4000-20.6400
- Importers 20.4800-20.4000
- Exporters 20.5600-20.6400
- USDZAR 18.3400
- EURZAR 17.9100
- GBPZAR 20.5200
- A message from Rand Water indicates that it is already throttling water supply in Johannesburg by 30%, saying residents are ‘using too much’.
- But residents have fired back, arguing that the dams are almost full and asking who really is to blame.
- MTN told Telkom that it ended the talks on Tuesday after it couldn’t get assurances around exclusivity, a representative for Telkom said in response to Bloomberg questions.
- Telkom plunges over 22% after MTN walks away
- While MTN’s share price closed almost 4% down on Wednesday, 19 October. MONEYWEB
- ESKOM : LOADSHEDDING LEVEL 3
- Stocks traded lower on Thursday, as the Dow shed 0.3%, the S&P 500 dropped 0.8% and the Nasdaq Composite lost 0.61%, with US stocks posting their second day of losses.
- The moves came as Treasury yields surged higher on expectations that the Federal Reserve will need to stay aggressive to bring down inflation.
- US stock futures extended declines on Friday, with the Nasdaq 100 down nearly 1%, while S&P 500 and Dow futures lost at least 0.2%.
- Snap shares plunged 26% in late trading after missing third quarter revenue expectations and offering weak revenue guidance for the fourth quarter.
- The US 10-year yield, reached the 4.3% mark, the highest since June 2008. Traders remain concerned about inflation and fears that the Federal Reserve would need to stay aggressive.
- Philadelphia Fed President Patrick Harker was among the latest policymakers to echo the US central bank’s intention to tighter monetary policy.
- He said : interest rates will likely rise to “well above” 4% this year and then hold them at such restrictive levels.
- also, the IMF now expects the Euro area to grow at the weakest pace since 2001.
- The only other periods were the global financial crisis and the acute stage of the coronavirus pandemic.
- Traders indicating the ongoing energy crisis, the war in Ukraine, and record inflation as a significant risk for the region.
- Germany’s 10-year Bund yield, the European benchmark, rose towards 2.5%, closing in on its highest level since August 2011. Reuters
- The Dow fell 90 points to 30,333
- The Sp500 fell 29 to 3,665
- The Nasdaq fell 65 to 10,614