South African Rand (ZAR) Exchange Rate Forecast Unstable, Friday Could be Influential for USD/ZAR
The USD/ZAR exchange is trading at 10.5874 as a tempestuous week nears its close. The Rand has struggled to gain any stability or upward trajectory over the past few months as South Africa’s growth outlook was severely knocked by global and domestic economic crises, such as the recent long-term 70,000 person platinum mining strikes.
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This week saw the conclusion of the strikes and the return to work for thousands of workers after five months of stoppage. The prolonged period of downed tools is estimated to have cost the nation $3.4 billion US Dollars.
However, just as the Rand was beginning to feel the benefit of recent signs of stability in South Africa, Friday has seen confirmation of another strike – which is set to take place from 1 July.
Unfortunately, over 222,000 workers will be subjecting themselves to strike action, which will paralyze metal companies.
The National Union of Metalworkers of South Africa (NUMSA) are asking for a 12% wage increase under a three year contract, with a requested raise of 8% within the first year.
The Rand has fallen in light of recent events, hitting its lowest level for the week on Thursday and falling to 10.6800 against the US Dollar.
Tradition Analytics stated: ‘The announcement of more large-scale strike action has helped to ensure that the Rand is underperforming all emerging market currency peers.’
However some economists hold hope that support could be gained for the Rand whilst the weakened US Dollar flounders against other majors.
With the Federal Reserve unwilling to end quantitative easing in a hurry, the Rand may be able to buy some time.
Currency expert for Rand Merchant Bank John Cairns has stated: ‘US GPD data has shocked’.
South Africa will see results for Private Sector Credit data on Monday as well as Balance of Trade figures.
The latter report is expected to show a drop from the previous -13.03B Rand to 6.1B Rand. If these forecasts prove accurate it could be a good stepping stone for the Rand to attempt to gain some stability.
On Wednesday the publication of South African consumer confidence data will occur.
It is expected that the confidence gauge dropped to -7.71 from the former -6.0 and Friday could see a positive day for the Rand if the South African Manufacturing PMI data for June reaches the forecast 50.21 from May’s 44.3.
SEIFSA (Steel and Engineering Industries Federation of South Africa) executive Kaizer Nyatsumba has expressed concern that the want for higher wages has resulted in a strike.
He stated: ‘I plead that we work together to preserve jobs and to grow the metals and engineering sector in South Africa. Let us give those companies that continue to operate in the metals and engineering sector an opportunity to survive and fight another day in this ultra-competitive, low margin environment.’
With further upheaval due to shake the South African economy, the Rand may not be able to compete even against a flattened US Dollar.
July 1 will see the start of strikes and hopefully for South Africa they will be swiftly concluded.
The Rand is currently trading against the US Dollar at 0.0944; conversely the US Dollar to Rand rate is sitting at 10.5874.