View this email in your browser

Morning NOTE

24 October 2022


The ZAR strengthened dramatically from 18.5300 to reach 18.0300, after the BOJ intervened in the Yen FX market.


  • The Rand hit 18.5300 in Friday’s session on the back of global risk off and the continued rise in yields due to the threat of inflation and central bank actions.
    • However, at the close of the London trading session, when liquidity traditionally drops off, the BOJ stepped in and “BOUGHT YEN” .
    • The intervention action sending the Yen from a 1990 weakest level of 152 to a low of 145.39 (a Yen gain of 4.35%).
    • The resulting actions saw markets switch from RISK OFF TO RISK ON .
    • Stocks rebounded and the Dollar reversed sharply allowing for a stronger Rand.
    • The SP500 recovered from a low of 3643 to reach 3802(+4.32%).
  • Comments on intervention:
  • The Japanese authorities are against the sharp fall in the Yen. The Yen has lost more than 30% in 2022 alone vs the Dollar.
    • The reasons are quite simple: The Fed are hiking interest rates to combat inflation and the Japanese are refusing to do so.
      • US rates (Fed funds) not at 3.25% vs JPN at 0% .  US inflation also at 8.1% vs JPN 3.00%
    • The BOJ aims to maintain its zero rate policy to stimulate the economy as it recovers from COVID-19 and refusing to adjust their stance.
    • Markets reacted and bought Dollars in favour of the Yen.
  • Conclusion: unless the Japanese adjust their policy stance the Yen will continue to weaken , even if the BOJ intervenes to slow down the depreciation.
  • The story remains INFLATION, and rates will continue to rise to combat inflation, thus favouring the US Dollar.
    • Likewise, any signs of a slowdown in inflation (and signs are appearing that we could see this in early 2023),
    • Expect a rapid reversal in the Dollar in favour of risk assets like the ZAR and stocks.

Significant Market Data:

After a slow week it kicks off on Wednesday and  Thursday.



  • 11h00: SA PPI YOY 15.8% EXPECTED  VS 16.6% PREVIOUS
  • 14H15: ECB INTEREST RATE DECISION +0.75BPS HIKE EXPECTED ( from 1.25% to 2.00% ) .
  • 14H30 : US GDP Q3 : +2.1% EXPECTED VS -0.6% PREVIOUS




  • 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.

Trade today: BUY USDZAR on dips.  

Expected Ranges

  • USDZAR :  Expect a range 17.9000-18.3700
    • Importers 18.0300-17.9000
    • Exporters 18.2000-18.3700
  • EURZAR :  Expect a range of 17.7600-18.0600
    • Importers 17.7600-17.6600
    • Exporters 17.9100-18.0600
  • GBPZAR :  Expect a range of 20.2200-20.8800
    • Importers 20.4200-20.2200
    • Exporters 20.6500-20.880


  • USDZAR 18.1400
  • EURZAR 17.8500
  • GBPZAR 20.6000



  • President Cyril Ramaphosa has announced a raft of changes his government plans to implement.
    • The comments on the back of the State Capture Commission of Inquiry’s recommendations – including stricter rules for state-owned enterprises.
  • Former president Jacob Zuma has said he will stand for election at the ANC’s elective conference in December because age is not a factor in the governing party.
    • The 80-year-old has said he will stand for election at the ANC’s elective conference in December because age is not a factor in the governing party.
    • Economic Freedom Fighters (EFF) president Julius Malema said that for as long as the ANC and President Cyril Ramaphosa was in power, South Africa was destined to become a failed state.
      • Malema delivered his closing remarks at the party’s KwaZulu-Natal provincial people’s assembly in Durban.
      • He called Ramaphosa a part-time president, claiming the president could not run a country and a business at the same time. Ewn
  • Eskom said SA is back at stage 4,
    • Eskom has implemented Stage 4 blackouts from noon until 5am Monday morning.
    • It says its emergency generation reserves at both diesel and pumped storage dam levels are almost depleted.
    • The higher blackout stages will help build up the emergency generation reserves during the week.
    • Stage 4 blackouts will be implemented daily between 4pm until 5am from Monday until Wednesday.
      • Stage 3 will be implemented for the rest of the day.



  • US stock futures rose on Monday, extending gains from last week as investors looked ahead to a batch of earnings reports.
  • Wall Street capped off a volatile week with a huge rally on Friday, with all three major averages surging more than 2% following BOJ INTERVENTION.
  • Those moves came even as Treasury yields remained at elevated levels, while the third quarter earnings season has had mixed results so far.
  • Investors now await quarterly results from big tech names including Alphabet and Microsoft on Tuesday, Meta Platforms on Wednesday and Apple and Amazon on Friday.


  • US 10 Year Note Bond Yield was 4.15 percent on Monday October 24, according to over-the-counter interbank yield quotes for this government bond maturity.
  • Markets continue to price in 75 bps at next week’s FED meeting.


  • The Dow jumped 748 to 31,082
  • The SP500 added 86 to 3,752
  • The Nasdaq  added 244 to 10,859


  • Asian markets higher on the back of BOJ ACTIONS, but appeared to reversing these gains at the onset of the European session.
    • In Japan, the Nikkei 225 Index rose 0.31% to close at 26,975 recouping some losses from last week, underpinned by a strong rally in technology stocks.
      • Japanese shares also tracked their US peers higher following a Wallstreet strong close.
      • Meanwhile, traders continued to track sharp yen moves as Japanese authorities intervened again in the currency markets .
      • But investors focused on the Bank of Japan’s dovish policy ahead of its meeting this week.
    • In Australia, the ASX 200 Index jumped 1.54% to close at 6,779 on Monday, reversing losses from last week, with mining stocks leading the charge amid a surge in metals prices.
      • Australian shares also tracked their US peers higher as investors started to focus on the likely peak for Federal Reserve rate hikes.
      • Strong gains were seen from heavyweight miners including BHP Group (2.6%), Fortescue Metals (2.5%) and Rio Tinto (1.2%).\ Reuters

The US Dollar

  • The dollar rose above 112 on Monday, recouping some losses after a sharp fall in the previous session which was driven by Japanese intervention to prop up the yen.
    • After delivering a widely expected 75 basis point rate hike in November, Fed officials are likely to consider a smaller increase in December amid concerns about overtightening, the WSJ reported.
    • The dollar weakened sharply against the euro, sterling and after the JPY intervention.
    • Meanwhile, the greenback has recovered about half of its losses against the yen after Japanese authorities likely intervened again in the currency market
    • The FT reported the Japanese  government spent about $30 billion on Friday in its efforts.
    • Investors now await central bank decisions worldwide and a raft of US economic data. \FX news

The Yen

  • The Japanese yen held near 148 per dollar on Monday, trading in a wide volatile range of between 145 to 150 as Japanese authorities likely intervened again to support the currency.
  • Traders however remained bearish due to the Bank of Japan’s divergent monetary policy ahead of its meeting this week.
  • Japan is suspected to have spent $30 billion in its latest efforts to prop up the yen after it sank to a 32-year low of 151.94 per dollar.
  • Prime Minister Fumio Kishida also reiterated over the weekend that the government will take “appropriate” actions when necessary to counter excessive currency moves, but did not confirm last week’s intervention.
  • The Japanese yen has declined nearly 30% against the dollar this year as the BOJ committed to ultra-easy monetary policy to support economic recovery,
  • This while the US Federal Reserve keeps on aggressively raising interest rates to combat surging inflation. \FX news

Crude oil

  • WTI crude futures traded around $85 per barrel on Monday, for the past three sessions as investors weighed the prospect of tighter supply against fears of a demand-sapping global recession.
    • Markets remained cautious as OPEC+ is set to reduce output from November, while the European Union’s ban on Russian crude takes effect in December.
    • Meanwhile, oil is still facing downward pressure from a strong dollar that makes greenback-priced commodities more expensive for overseas buyers, as well as from mounting risks of a global recession.
    • Markets are now expected to pay attention to how well member countries would comply to OPEC+ production cuts next month. \Gulf Energy News


  • Gold prices steadied above $1,650 /oz, supported by hopes that the US Federal Reserve will grow less hawkish later this year.
    • After delivering a widely expected 75 basis point rate hike in November, Fed officials are likely to consider a smaller increase in December amid concerns about overtightening, the WSJ reported.
      • This however remains speculation.
    • Meanwhile, investors remained cautious about upside risks to inflation that could drive another rally in the dollar and Treasury yields.
      • Markets also stayed firmly positioned in the dollar as a safe-haven asset and as an alternative to gold amid heightened political and economic uncertainties worldwide.
      • Investors now await policy decisions by other major central banks this week, as well as a raft of economic data from key economies. \Kitco metals


Copyright ©
2022 RussellStone Treasury 
All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.