RAND ANALYSIS
ZAR FUNDAMENTAL BACKDROP
After a tempestuous week last week, the rand[3] has opened up slightly stronger against the U.S. dollar[4]; primarily buoyed by rising commodity prices but more specifically South African linked commodities such as platinum[5], gold[6] and iron ore which are all trading higher today.
GET YOUR Q3 RAND FORECAST HERE![7]
LOCAL CHALLENGES ESCALATE
From the South African perspective, COVID-19 concerns remain while vaccine rollouts have been slower than initially expected. While cases are steadily rising, the country remains in lockdown alert level 4 which could be prolonged if the current trajectory persists.
Politically, discussions about the former President Jacob Zuma’s incarceration has flooded local headlines with question marks over the capacity of the current President Cyril Ramaphosa and the judicial system to follow through on the imprisonment of Mr. Zuma.
An additional dent to investor confidence has been the case of Rio Tinto announcing force majeure over local mining company Richards Bay Minerals (RMB). This is largely due to the local community extorting the mining companies which at its worst led to the death of an RMB employee. This could have a contagion effect on other businesses which may contribute to rand weakness long-term.
ATTENTION ON FOMC THIS WEEK
Upcoming risk events are slim relative to last week’s bombardment of high impact announcements. Tomorrow, the Federal Market Open Committee (FOMC)[8] minutes (see calendar below) will be a key focus for dollar crosses (including USD[9]/ZAR) which could provide some guidance on tapering, and the disposition of Fed officials on potential
