South African Rand (ZAR) Exchange Rate Forecast to Struggle against the Pound
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Friday saw the Rand weaken against other majors for the fifth consecutive day following weakness in the South African economy. The Rand showed the trade deficit widen in 2014 considerably more than 2013.
Economist Christie Viljoen stated: ‘This is bad news on top of other disappointing economic data. July’s trade report will not encourage much optimism either due to impact of National Union of Metalworkers of South Africa (NUMSA) strike.’
The Rand has experienced difficulty in 2014, being subjected to two highly influential strikes that have dominated seven months of the year so far. However, this week saw the end of the latest National Union of Metal Workers of South Africa (NUMSA) work stoppage; alas, the conclusion has not been without its complications.
Although the NUMSA strikers signed an agreement on Wednesday to allow the workers to return on Thursday, complications arose by way of the National Employers Association of South Africa (NEASA) rejecting the offer. NEASA resorted to locking out strikers when they reported for work on Thursday as they didn’t agree with the deal made following government intervention.
Chief executive for NEASA Gerhad Papenfus stated: ‘The current difference between NEASA and NUMSA will not be resolved through threats and legal action, but through the appropriate channels—something NEASA was denied during the most crucial portion of the recent round of wage negotiations.’
However, such conflicts are subject to debate regarding legality; whilst NUMSA complain that the lock outs are illegal, NEASA contest that they are perfectly within their rights to do so.
NEASA continue to argue that the four week metal workers strike involved violence. Papenfus continued: ‘There were instances where employees were dragged out of offices and assaulted; where business owners were threatened with their lives, businesses were forced to close their doors, properties were damaged and interdicts to curb the violence and destruction. Employers were forced to look on while these events unfolded, at times without police protection.’
Thursday, August 7 will see the release of South African Manufacturing Production data which is expected to see a drop of -3.7% year-on-year.
The Rand will remain volatile until the remainder of the workers are able to return to work, and whilst political issues in South Africa remain unstable. Furthermore, fears for South Africa’s economy entering recession are rife.
On Monday the South African Rand (ZAR) exchange rate continued trading in a softer position against Pound Sterling (GBP) and the US Dollar (USD).
Last week South Africa’s trade deficit data indicated that the nation is failing to get its trade balance under control, and the Rand accordingly softened against the majority of its currency counterparts. Ongoing unrest in the nation’s metalworking sector also kept the currency depressed.
The Pound managed to advance by 0.45% against the Rand as a new week of trading kicked off.
While Rand movement was limited by a lack of domestic data, a decline in China’s non-manufacturing PMI had a modest impact on the emerging-market currency and the Pound was boosted by a slightly better-than-forecast UK Construction report.
Tomorrow we forecast that volatility in the South African Rand (ZAR) exchange rate could be caused by the KASIGO Manufacturing PMI.
The latter half of Wednesday sees the Rand gaining against the Pound reaching 0.0552 in the ZAR to GBP exchange rate.
Furthermore the Rand has gained some ground against the highly popular US Dollar on Wednesday afternoon, reaching session highs of 0.0932 after falling to its lowest point in the ZAR/USD exchange rate in a month.
The US Dollar was trading at 10.8120 against the Rand, showing its strength in the currency market of late.
As positive US figures continue to boost the ‘Buck’ other currencies have fallen by the wayside.
Barclays Africa commented: ‘We expect the Rand to remain vulnerable […] and would not be surprised if we re-test July’s Dollar highs of 10.84.’