The rand has weakened nearly 4% towards the US greenback because the begin of the week and is at the moment testing the 200-day shifting common, says Matthew Axelrod, head of threat at DG Capital Forex.
If the native forex closes above R15.10/greenback it will be a bearish sign with the subsequent resistance stage at R15.25 after which R15.50, he mentioned.
“We really feel the market is pricing South African Reserve Bank charge hikes kind of pretty, however perhaps being considerably over-zealous on US Federal Reserve hike pricing.
“In the short term, the rand could continue to weaken to around R15.50 and then, if the Federal Reserve disappoints on 4 May, it could pull back to around R15.00.”
Axelrod famous that there are a number of causes for the forex slipping this week:
- Stage 4 load shedding is one in every of them;
- The intense floods in KZN and the harm precipitated is one other;
- The inflation print got here in beneath expectations, implying much less upward strain on native rates of interest; and
- The US greenback has additionally been robust because the market is pricing in fairly a hawkish Federal Reserve in two weeks’ time.
“Load shedding has a negative effect on the rand as the economy cannot function efficiently without power. The higher the stage we need to enter, the more negative the effect will be. This week we have had to move to Stage 4, which sees a significant amount of power removed from the grid.”
“Although inflation printed proper on the prime finish of the South African Reserve Bank (SARB) goal band, it was barely beneath expectation, whereas core inflation was nonetheless beneath the midpoint, which factors to weak demand-side inflation strain.
“These prints suggest that the SARB can continue gradually hiking rates, and that aggressive hikes aren’t necessary, which is rand negative, while the US Federal Reserve is currently relatively hawkish.”
At 14h10 the rand was buying and selling at these ranges towards main currencies: