South African Rand Forecast: A New Bout of ZAR Weakness on the Horizon Warn Barclays
- Written by: Gary Howes
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The South African Rand is forecasted to experience further selling pressure in coming weeks warns a new foreign exchange analysis issued by Barclays.
The South African Rand (ZAR) continues to come under pressure on the global FX markets, but those hoping for a respite in the selling may be disappointed.
A look at today's exchange rate market action shows the US dollar to South African Rand exchange rate to be 0.4 pct higher at 10.8823.
However, the pound sterling to South African Rand rate is 0.13 pct lower at 17.8182.
NB: Our ZAR quotes are taken from the spot markets; your bank will subtract a discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer and deliver you up to 5% more currency. Please learn more here.
Today we hear from the FX team at Barclays where analysts are warning a number of factors will likely lead to the resumption of ZAR selling pressure.
Peter Worthington at Barclays says:
"Tactically, market positioning has become short ZAR again in recent weeks. This ensured that the local unit benefited from a classic short squeeze in the wake of December’s disappointing US employment report.
"However, we believe that this week’s US and local data, as well as the redemption of the R206 (2014) bond, could be conducive to a renewed bout of ZAR weakness implying that participants should consider going short ZAR again."
However, there will be periods of South African rand strength as technical positions are forced to unwind.
"Technically, we expect the overbought conditions in USD/ZAR to unwind in the form of to-and-fro action over the next three to four months between 10.40 and 11.40," says Worthington in his South African Rand forecast note.
Global markets push higher
Turning to global market sentiment we note a broadly positive tone has seen the FTSE 100 index reach an eleven-week high after the World Bank increased its global-growth forecast.
Burberry led the gainers after the country’s biggest luxury-goods maker jumped the most in six months after reporting better than expected quarterly results.
"US futures are indicating a higher open, helped by Bank of America’s results which showed profit quadrupled. Shares in Bank of America were up nearly 2.7 percent in pre-market trading following their announcement with the bank reporting an eight-fold jump in fourth-quarter profit," says Lee Mumford at Spreadex.
Brent oil prices fell to their lowest intraday level in two months following the first increase since March in oil supply from Libya, with the modest recovery in Libya helping supplies.
