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US Dollar South African Rand (USD/ZAR) Exchange Rate Sinks as SA Economic Confidence Returns

May 22, 2019 - Written by John Cameron

US Dollar South African Rand (USD/ZAR) Exchange Rate Sinks as SA Consumer Prices Decrease

The US Dollar South African Rand (USD/ZAR) exchange rate is down today and is currently trading round R14.360 on the inter-bank market.

The South African Dollar (ZAR) rose against the US Dollar (USD) despite weaker-than-expected South African consumer price data for April, which came in at 0.6% against March’s 0.8%.

Instead hopes have risen for the South African economy, as SA President Cyril Ramaphosa, selects a new cabinet that promises to be more balanced.

Mr. Ramaphosa said:

‘We’ll present an outcome that I think the country will welcome and will be pleased with - because it will have a very good balance of gender, youth, competence, demographic [and] regional spread and all that. So wait and see, watch this space.’

Reforms are seen to boost South Africa’s economy by R332.7bn, restoring ZAR trader’s optimism in the emerging economy. Ongoing US-China trade tensions are also improving risk appetite in ZAR.

Lullu Krugel, a Chief Economist at PwC South Africa commented:

‘$23bn in additional economic output would create jobs and income opportunities for many Africans, helping stem the brain drain from the continent, increasing government revenues, and expanding consume markets that have proven so attractive to international investors.’

USD/ZAR Exchange Rate Falls as China Threatens ‘Retaliation’ against American Businesses

The US Dollar has eased following fears that China could retaliate against US action against the Chinese telecom giant, Huawei, with China threatening American businesses in China.

Tim Stratford, the Chairman at AmCham China, commented:

‘Particularly in the wake of the decision to put Huawei on the... entity list, there are concerns that the government of China may decide to retaliate against American companies. These are real concerns, and they increase the risk as people are considering how they should make adjustments to their business models.’

Tariffs on US businesses are harming the economy, and with tensions rising high between the two superpowers, this is beginning to weigh on market confidence in the US Dollar.

USD traders will be awaiting the FOMC minutes this evening, and with any bullish comments about the US economy, this could see the ‘Greenback’ rise.

USD/ZAR Outlook: SA Governmental Reforms to Remain in Focus

South African Rand traders will be looking ahead to tomorrow’s interest rate decision from the South African Reserve Bank, which is expected to hold steady at 6.75%.

US Dollar investors, meanwhile, will be awaiting the continuing jobless claims figures for May, which are expected to increase, potentially weighing on the USD/ZAR exchange rate.

These will be followed by the flash Markit Manufacturing PMI figures for May, which are expected to ease.

The USD/ZAR exchange rate will likely remain focused on political developments, as reforms in the SA government are likely to boost the South African Rand, with hopes running high for the SA economy.

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