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South African Rand Eyes November Highs against Dollar and Pound

  • ZAR could see November highs Vs USD & GBP
  • After recovery trend survives market volatility
  • Budget progress & SARB rate outlook support

The rand

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The South African Rand remains on an upward trajectory that could potentially pull USD/ZAR back to 14.89 if the currency’s appreciation continues in the weeks ahead, which would risk pushing GBP/ZAR down near to 20.20.

The Rand rose against a softening Dollar on Wednesday while also edging higher against other currencies like the Pound as it continued to draw a line under a late January sell-off that had threatened to end its multi-month recovery from lows reached last November.

The Rand had fallen heavily alongside other currencies late last month as stock markets and other risk assets weakened across the globe, leading the USD/ZAR exchange rate to rally from 15.06 to 15.71 in a matter of days before the Rand found its feet again as January gave way to February.

“The rand continues to follow global markets, ignoring domestic good news on the revenues figures, higher for the first three quarters of the year 2021/2022 compared to the same period, of 2020/21 by 34.4% y/y, says Annabel Bishop, chief economist at Investec.


Above: USD/ZAR shown at daily intervals with Fibonacci retracements of late November decline indicating possible areas of resistance to any recovery, and shown with selected moving-averages. Dollar rally loses steam near 55-day moving-average and 50% Fibonacci retracement of November decline.

Renewed stability in global markets has been positive for all currencies including the Rand, which appeared to overlook an announcement from state power utility Eskom warning that stage 2 load-shedding is likely to impact power supply until Monday.

“The system has been under significant pressure, and while the use of emergency generating reserves managed to stave off earlier load-shedding, breakdowns at generating units at Kusile and Kendal power stations overnight have forced Eskom to enact SA’s first bout of load-shedding for 2022,” explains Siobhan Redford, a macroeconomist at Rand Merchant Bank.

But the Rand could be in line to benefit this February from what looks set to be good fortune and favourable progress in efforts to improve the nation’s finances after last Friday’s National Treasury announcement that tax revenues were stronger and spending lower than expected for December.

Finance Minister Enoch Godongwana is set to deliver his inaugural national budget speech on February 23 and while the leadup to such events has previously been an apprehensive period for the Rand, the data released last Friday suggests this time could be different.

  • GBP/ZAR reference rates at publication:
    Spot: 20.69
  • High street bank rates (indicative): 19.97-20.11
  • Payment specialist rates (indicative): 20.51-20.59
  • Find out about specialist rates, here
  • Set up an exchange rate alert, here

“These main budget revenue figures show 76.8% of planned revenue of R1.5 trillion has been collected so far, while only 71.8% of allocated expenditure has occurred, with a significantly smaller deficit, of closer to 5.0% of GDP (versus -6.6%), likely if the trend continues. A quicker moderation in the fiscal deficit than the MTBPS of November 2021 forecast would be positive for the rand," Investec’s Bishop wrote in a Monday note to clients.

Bumper profits from the mining sector have helped lift the tax take following strong gains for resource prices since the middle of 2020 but South Africa’s treasury has also made progress on the expenditure side of its ledger, with outlays lower than had been planned, and both are positive developments for perceptions of creditworthiness and South African asset values.

USD ZAR with Fibs

Above: USD/ZAR shown at daily intervals with Fibonacci retracements of June 2021 rally indicating possible areas of support for the Dollar, and shown with selected moving-averages. Shows little, if any impediment for a fall back to 14.89 once beneath 2022 lows near 15.06.

These factors and the market’s elevated expectations for interest rates at the South African Reserve Bank (SARB) are supportive of the Rand and could offer it a potentially significant tailwind that may be likely to keep the downtrends in USD/ZAR and GBP/ZAR in place during months ahead.

The Pound to Rand exchange rate has spent the recent fortnight trading between significant technical resistance at 20.86 and strong support levels around 20.39 but would be likely for fall back toward the 20.20 level if over the coming weeks, the all-important and highly influential USD/ZAR exchange rate slips below the 15.0 handle and heads toward 14.89 threshold that marks its next major support level on the charts.

GBP to ZAR weekly

Above: GBP/ZAR shown at weekly intervals with Fibonacci retracements of June 2021 rally indicating possible areas of support for Sterling. Selected moving-averages also mark likely areas of technical support and resistance. Click image for closer inspection.