South Africa - rock RAND roll - Page 2
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Thread: South Africa - rock RAND roll

  1. #11
    Very strange, but for some six months (counting from October 2008 to March 2009 inclusive), the Rand has averaged 9.95:$, month after month, such as in flat earth.

    There were sizeable daily variations, of course, at one point near 12:$ at the moment of maximum strain during 4Q2008, but generally a very level type of presence round.

    It was as if the world did not go walkabout, Eastern Europe did not go bankrupt, our equity market did not shed 40%, we did not have to finance an R200bn current account deficit and our politics did not feel otherworldly.

    With that kind of tree hugging going on, what is a guy supposed to forecast comes next?

    Surely, as global shocks move, we can not go larger than what happened last September/October? And that was great to get a step up from near 7:$ to near $10:$. That is a 40 percent Rand weakening.

    The betting is that the true huge shock value lies . Then also do allow for the IMF getting reinforced with funding, and totally expected to bail whatever requires bailing, in addition to ECB swap lines and those Fed cluttering the entire world.

    Also, the Rand has been undervalued at such amounts. It isn't as if the Rand is inappropriately valued, inviting corrective focus.

    So downside for the Rand there might be, towards 12:$ and even $15:$, but it is not clear what might deliver this shortly. This was before thinking about the outbreak of swine flu in Mexico last week and what it could possibly lead to globally, if not included.

    On the flip side, the Rand might not have much firming potential either if the SARB were to provide countervailing pressure by resuming its foreign book topping up, bearing in mind that the state of this market (down) and our exports (greatly down).

    Up to now in April that the Rand has transferred back towards 9:$, but just how much farther could it move?

    A favorable shock could send the Rand sailing towards 8:$, never mind 7:$, for instance since New York equities are up and so are ours, or Chinese expansion pulls commodity prices higher and us well in its slipstream, or so the Dollar sells off Bad Hair Day and we get raised, or all of those good things together doing the pushing.

    Yet the SARB may not enjoy such Rand firming, and could start mopping (accumulating) a number of the excess capital inflows doing the heavy ling, keeping such funds in the foreign reserves (and then presumably buying Re-elect Obama Bonds, ere long called ROBs).

    Then again could swine flu begin shoving the Rand weaker if high yielders become penalized by means of a return flight to safe havens shortly?

    Finally, we are not in control of the Rand, given global events and how they influence on Rand sentiment. We seem to have defenses against a weakening Rand trend.

    Yet globally there also seems to be proprietary activity nowadays at large investment banks, with the Rand being only 1 beneficiary getting somewhat less focus?

    Certainly, fundamental jolt shrunk the Rand by 40 percent in 4Q2008, but its stabilization then came as a bit of a surprise, at a time when many people believed more weakening the natural thing to occur, given the seriousness of global events during.

    At some point in recent weeks, however, the world seems to have come out of its deepfreeze. That is still a bear market rally. For others there is already more going on than only a bear turning over in its sleep. To put it differently, here comes the long awaited twist.

    Only to encounter this weekend that the logic of a swine flu outbreak in Mexico.

    In the event the planet is still likely to get serially disappointed with non-progress in the US (and European) banking saga, or any other disappointment that the world wishes to dish up (swine flu being only one possible candidate), we will find high yielders relapsing back towards their sold off amounts. For the Rand this indies 10:$10, if inside a wide 200 penny trading group. But potentially worse, based on any averse new worldwide shocks.

    If, however, the planet is steadily moving , laying the basis for sustainable healing, by addressing the banking mess, getting fiscal stimulus going and rebooting IMF finances, with the global market beginning to react (stocks, durable goods, production, capex) and efficiently comprising the swine flu outbreak, after which the worldwide investment image will even keep morphing.

    Between mid-2008 and Easter 2009, we saw that the puncturing of the commodity boom along with a fantastic capital withdrawal getting underway as cash began to flee the high-yielding-but-risky worldwide periphery for the low-yielding-but-safe worldwide center.

    Ironically, the safe financial center then imploded after 15 September, shortly followed with a global real sector collapse, but that seemingly added even more strongly into the centre's safe haven allure (do not ask why, it only reminds a lot Fatal Attraction).

    After five long months of debtors prison, March saw early stirrings, both about the US banking front (Timothy Geithner swinging his weight around) and in the economic statistics.

    Baltic shipping index stabilizing after selling off fairly seriously, global car sales picking up (Germany, Brazil and China offering incentives, with the UK about to trace ), industrial PMI signaling positive intent concerning stocks and new ordering in the united states and Europe, and not forgetting commodity prices ending freefall and recovering. Also select data about exports (Japan, others) and business assurance (Germany).

    Something is stirring, green shoots or anything, but it is also informing equity and credit markets.

    In the process, the fantastic worldwide capital withdrawal in the risky periphery seems to be reversing once more, some capital beginning to depart safe havens and getting into carry trade and peripheral high yielders.

    In the process, the Rand also got elevator, getting below 9:$ and the SARB allowing this. But from here onward, any additional global favouring of high yielders and thus the Rand may see more SARB response via renewed foreign reserve accumulation.

    Time will tell, not least seeing swine flu. Strategy to get a Rand in 8.50-9.50:$ land for the time being, however permit for wide daily trading ranges of around 100 cents either way.


    Cees Bruggemans is Chief Economist of First National Bank. Register to his free e-mail articles on www.fnb.co.za/economics

  2. #12
    I think it's clearly evident on the charts if the USD began its flight back home, the rand was massacred and risk aversion came in to effect. With the pull back to the rand after touching the high 11's, it actually hit the final fib goal and profit was merely taken causing a movement back down towards the 8's (the move to the high 11's was an ideal 61.8 fib movement on monthly). It is currently setting up itself and handle a vault towards the 15: $ as mentioned along with formation. Additionally, it is given feedback that was very good to us traders that it's responding to specialized setups well and makes that which traders typically think, an currency, very predictable or at least a very high probable predictability.

    As for SARB, I have never had faith in them and actually think they do not have a clue what they doing concerning the rand apart from Tito breaking bad jokes at media meetings and singling out reporters and economists that don't agree with his thinking.

    I feel the only way forward for the rand is down from the dollar, which range from given fundamentals and technical info. Any additional strength in the rand is pure chance for getting in at a price.

  3. #13

  4. #14
    Any thoughts on where the rand might go? Up or Down? Thanks!

  5. #15
    The rand can only go one way from here on out. Look out for spikes the way.

  6. #16
    With All the $1,3 trillion or so Shortage budget rand will go to R6,75 over 9 months, Only to strongly reverse and weaken towards year end

  7. #17
    Lol was hoping this thread will be about south africa world cup 2010. Anybody?

    I would love to but its certainly a bit out of the way lol

  8. #18
    Dont know why I didnt get in this pair sooner-paying about 5 pips on the spread and also of course the carry is wonderful. Made a nice move from this zone so I will be looking to hold this short as long as I could adding to it if we can knock out 10.5

  9. #19
    Twelve Cabinet ministers have just announced their resignation. Including Trevor Manuel
    USDZAR to get a rough ride.
    Long anybody?

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