South African Rand forecasted to come under pressure this week; but ZAR is higher today thanks to China

The South African Rand has been forecasted to come under pressure this week thanks largely to viewpoints and decision making at the South African Reserve Bank (SARB).

However, Monday morning has seen strong gains for ZAR following some decent economic news out of China. Thus, the importance of commodity prices and the impact of China on these prices will continue to be important for the performance of the South African Rand and Australian dollar.

A look at the latest ZAR spot rates shows the pound sterling versus South African Rand exchange rate is 0.8 pct in the red at 14.9705.
The euro versus Rand is 0.8 pct in the red at 12.9488.
The US dollar versus Rand is 0.7 pct down at 9.9183.

Please be aware that the above quotes are taken from the wholesale spot markets, your bank will affix their own discretionary spread to the figures. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please learn more here.

Rand forecasted to come under pressure thanks to SARB

Chris Walker at Barclays tells us that it is his base case that the South African currency will continue to feel the heat:

"SA’s large twin deficits and FX funding pressures suggest continued rand pressure but the SARB seems to be taking the view that the inflation effect of a weaker rand is likely to be temporary given the weakness of the SA economy.

"While this may well be the case, this stance likely invites more rand weakness and potentially at a faster pace than the countries where policymakers are already responding."

The spotlight should be on the MPC, which to announce its rate decision on the 18 July.

Walker says:

"SA’s large twin deficits and FX funding pressures suggest continued rand pressure but the SARB seems to be taking the view that the inflation impact of a weaker rand is likely to be temporary given the weakness of the SA economy.

"While this may well be the case, this stance likely invites more rand weakness and potentially at a faster pace than the countries where policymakers are already responding. We are bearish ZAR."