Rand Report: ZAR rallies amid global currency fluctuations: Image: Supplied

Rand Report: ZAR rallies amid global currency fluctuations

The rand’s rise was primarily influenced by international factors, particularly trends in the US Dollar (USD), though domestic economic data also played a significant role.

by Sable International

08-05-2024 13:04

in Money Matters

Rand Report: ZAR rallies amid global currency fluctuations: Image: Supplied

Over the past week, the South African rand strengthened against most major currencies. This rise was primarily influenced by international factors, particularly trends in the US Dollar (USD), though domestic economic data also played a significant role.

In the US, the Federal Reserve decided to maintain its current interest rates, continuing its approach of keeping rates “higher for longer” to combat inflation. Despite this consistent stance, recent US economic indicators have shown signs of a slowdown. Manufacturing data suggested a sector contraction, and the Job Openings and Labor Turnover Survey (JOLTS) reported fewer job openings than anticipated, hinting at a cooling economy. Additionally, the nonfarm payrolls report significantly underperformed against expectations.

The Rand’s trajectory

Domestically, South Africa’s economic data also impacted the ZAR, notably the trade balance figures and the government’s budget surplus. Although the trade balance did not meet expectations, the government reported a larger-than-expected budget surplus, contrary to predictions of a deficit. This positive outcome supports the effectiveness of current government policies for the remainder of the fiscal year.

Looking forward, rand’s trajectory is likely to continue being influenced by global events, particularly the monetary policy decisions of the US Federal Reserve. The expectation that US interest rates will remain elevated for an extended period could support the USD in the short term. Similarly, the South African Reserve Bank is expected to maintain higher interest rates to prevent inflationary pressures.