British Pound to Rand Exchange Rate (ZAR) Powers Ahead as South African Currency Declines vs GBP, Euro and US Dollar

Modified: Friday, 8 August 2014 11:24 BST - Written by Ben Hughes

STORY LINK British Pound to Rand Exchange Rate (ZAR) Powers Ahead as South African Currency Declines vs GBP, Euro and US Dollar

Currency News UK - The South African Rand (ZAR) fell sharply against the majority of its major peers, including the Pound Sterling (GBP), Euro (EUR) and US Dollar (USD) on Thursday as concerns over a possible Russian invasion of eastern Ukraine weighed upon demand for riskier emerging market assets. Up to 20,000 Russian combat troops have amassed on the Ukrainian border and NATO has warned that a possible attack could occur.

The South African Rand (ZAR) fhad already fallen against the US Dollar (USD), Euro (EUR), Pound Sterling (GBP) and other major peers on Wednesday as demand for riskier assets waned as concerns over a build-up in Russian forces on Ukraine’s eastern border increased fears of an escalation in the conflict.

The Pound Sterling to South African Rand exchange rate is trading down -0.26% at 18.05097 GBP/ZAR.

‘The Rand has gone lower in conjunction with everyone else. It has been a risk-off day. It’s been an emerging market sell-off day led by Russia,’ said Jim Bryson, a trader at Rand Merchant Bank.

On Tuesday, the South African currency came under further pressure and weakened against its major peers due to the publication of a disappointing domestic Purchasing Managers Index (PMI). July PMI declined to a level of 46.4 from 49.5. The data suggests that the nation’s manufacturing sector is deteriorating.

The index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in about 400 private-sector companies in manufacturing, mining, services, construction and retail.

In a PMI any figure above 50 indicates expansion whilst a figure below indicates contraction.

The fall in the figure was blamed on strike action in the platinum mining and metalworkers sectors.


HSBC economist David Faulkner said the PMI hitting a record low highlighted the "debilitating" effect of the metals and engineering strike, the "hangover" from a five-month strike at platinum mines, and the indirect effects of labour unrest on other sectors in the economy.

The Pound meanwhile declined against the majority of its most traded peers on Wednesday after data showed that UK industrial production rose less than economist forecasts in June.

According to the Office for National Statistics, month on month manufacturing production increased by 0.3%, a rally from the previous month’s figure of -1.3%, the figure was worse than the 0.7% expected by economists.

Year-on-year, U.K. manufacturing production rose by 1.9% in June from a year earlier, confounding expectations for a 2.1% gain, after a 3.7% increase in May.

Earlier in the session Sterling came under pressure after the British Retail Consortium said that store prices in the UK fell at annual rate of 1.9%, the largest decline recorded since the data series began in 2006. The report also showed that food-price inflation slowed to a record low level of 0.3%.

"Against a backdrop of stable commodity markets, the stronger sterling making imports cheaper and wavering retail spending, current levels of deflation are expected to continue," said Helen Dickinson, the BRC's director general.

Concerns over possible Russian military intervention in eastern Ukraine has dented market sentiment and is weighing upon the majority of emerging market and perceived riskier assets.

According to reports, Russia has deployed 20,000 troops along Ukraine’s eastern border. The build-up of troops has doubled in the past week alone. The move comes after the EU and USA imposed fresh and tougher sanctions against Moscow.

The United Nations said the conflict must end in order to prevent more civilians from being caught in the crossfire. With the Russian, troop build-up the markets grew jittery as they waited to see whether the West would respond with military activity of its own.

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