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Rand Outlook: GBP Advances to 9-Month High vs ZAR Due to Risk Aversion

March 10, 2015 - Written by Ben Hughes

The Pound Sterling advanced to a 9-month high against the South African Rand as demand for riskier emerging market assets weakened on expectations that the US Federal Reserve will begin to hike interest rates in the summer. Sterling meanwhile was higher against most of its major peers as the Bank of England is one of only a few central banks likely to raise interest rates.



The Rand tumbled to a new 13-year low against the US Dollar and declined against the majority of its most traded peers as economic data out of China also weighed upon sentiment towards emerging market assets.
Mixed economic data from China added to the woes that have kept emerging-market currencies constrained against the ‘Greenback’. While consumer inflation rebounded in February, the producer price index (PPI), which measures prices at the factory gate, dropped 4.8% year on year in February, extending the 4.3% year on year decline in January, official figures showed. The report also suggests that demand in China is waning. Weak demand from China is bad news for South Africa as the Asian nation is its biggest trading partner.

Domestic data also weakened the Rand as it showed that business confidence fell in the first quarter of this year. According to the Rand Merchant Bank/Bureau (RMB) for Economic Research, the business confidence index fell two points to a number of 49. The figure suggests that there is a divide between those businesses that are satisfied and those who are not. Confidence is needed to rise before investment and job growth can occur. The sharpest declines in confidence were recorded in the nation’s manufacturing index as confidence fell from 42 to 30 index points.

‘The fourth quarter’s post-strike ramp up in manufacturing production failed to develop into a lasting improvement, as the earlier strong recovery in domestic orders lost momentum in the first quarter,’ said RMB.

The Pound meanwhile advanced as it found support from a report released by the British Retail Consortium (BRC), which showed that retail spending in the UK was 1.7% higher in March compared to the preceding year. On a monthly basis, sales rose by 0.7%.

Expectations that the Bank of England is likely to raise interest rates was also supporting the currency as the BoE’s monetary policy is on a divergent trend with many other central banks such as the ECB and BOJ.

Today's Rand Exchange Rates:

The South African Rand to Euro exchange rate today is converting -0.66 per cent lower at 0.07571 ZAR/EUR.
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The South African Rand to Pound Sterling exchange rate is -1.56 pct lower with a conversion rate of 1 ZAR equals 0.05380 GBP.
The South African Rand to Hong Kong Dollar exchange rate is -1.78 pct lower with a conversion rate of 1 ZAR equals 0.62938 HKD.
The South African Rand to Japanese Yen exchange rate is -1.95 pct lower with a conversion rate of 1 ZAR equals 9.83093 JPY.
The South African Rand to Mexican Peso exchange rate converts -1.12 per cent lower at 1 ZAR is 1.26515 MXN.
The South African Rand to Norwegian Krone exchange rate is +0.15 pct higher with a conversion rate of 1 ZAR equals 0.65692 NOK.
The South African Rand to US Dollar conversion rate is -1.77 pct lower at 0.08111 ZAR/USD.
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