US Dollar to South African Rand (USD/ZAR) Exchange Rate Bullish; NUMSA Decision Monday
The US Dollar (USD) saw a highly influential week, attaining month highs against other majors as positive data allowed the ‘Buck’ to climb. Friday saw the South African Rand (ZAR) to US Dollar exchange rate trade between the boundaries of 10.5020 and 10.5475 after the release of influential US figures.
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The US saw significant leaps in figures for Durable Goods Orders data, showing a rise by 0.7% in June, bypassing the 0.5% forecast.
Economist Paul Dales stated: ‘June’s strong orders data and other survey evidence suggest that business investment will continue to grow at a decent rate in the second half of the year.’
Furthermore, Thursday saw surprisingly upbeat US unemployment data published. Initial Jobless Claims only showed 284K new job-seekers, despite the 310K economists’ had forecast. Continuing Claims also saw a positive outlook as only 2500K job-seekers still remained claiming.
As a result of the possibility of a rise, the US Dollar became bullish in the currency market. On Friday the US Dollar to Pound (GBP) exchange rate traded between the regions of 0.5883 and 0.5897. Meanwhile the ‘Buck’ trended between 0.7424 and 0.7448 against the Euro (EUR).
The US will be influenced by Composite and Services PMI figures released on Monday; as the only major country releasing data, other currency pairings will fluctuate on the news dependent on the outcome.
Conversely the South African Rand has struggled against other majors for quite some time following strike action that has taken place throughout the majority of the year.
The Rand had remained relatively steady on Friday, until positive data boosted the US Dollar. Representative for Barclays Africa Judy Padayachee commented: ‘Although the US Dollar index is stretching towards last month’s high, the Rand held up better against the Dollar. However, we remain concerned about the overbought Rand reading, and today we are watching the 10.40 and 10.60 levels for direction.’
With further setbacks for the finalisation of the work stoppage, the Rand is likely to remain volatile for some time.
The latest National Union of Metal Workers of South Africa (NUMSA) strike has created fears of recession for the South African economy. The latest wage offer has been accepted by strikers; however, the deal cannot be made as NUMSA won’t agree to other conditions.
A union member commented: ‘The strike will continue because we have problems with changing Section 37. They want to make the union weak and toothless.’
NUMSA spokesperson Irvin Jim stated: ‘Employers are pushing for a situation which could be described as anarchical. We are very close to each other and it is not NUMSA who is delaying the process. I think the greatest damage could be the collapse of collective bargaining. They [employers] are running the risk of being followed by NUMSA on plant by plant negotiations. If you don’t have centralised bargaining, you will also see more strikes.’
The coming week will prove interesting for the USD/ZAR exchange rate dependent on how favourable US data becomes, as well as any advancement from the work stoppage in South Africa. South Africa is due to publish Unemployment Rate figures on Tuesday which may have some affect for the Rand.
UPDATED 10:06 GMT 28 July 2014
Monday sees the US Dollar (USD) trading up against the South African Rand (ZAR) at 10.5143; this session has seen highs of 10.5295, whilst also dipping to lows of 10.4850.
Negotiations for the NUMSA work stoppage continue into their fourth week this week, with hopes that the latest deal may be substantial enough for members to return to work.
Representative for NUMSA Karl Cloete suggests: ‘Feedback to membership and the mandate from membership is continuing tomorrow and then at 4pm on Monday, we’ll convene a press conference to communicate NUMSA’s decision on a settlement or discontinuation of the strike.’
The US will publish Marking Composite and Services PMI on Monday alongside Pending Home Sales figures which could give the ‘Buck’ a further boost in the currency market.
South Africa meanwhile will produce Unemployment Rate figures on Tuesday, which are currently forecast to rise to 25.2% in the second quarter which could cause further volatility for the Rand.
The ZAR/USD exchange rate is presently resting at 0.0950—this session’s low, whilst reaching highs of 0.00954.