South African Rand: Risk-Off Mood Interrupts Recent ZAR Strength by Markets and Money
The South African rand is now moving in the opposite direction of its currency market momentum. This is despite a recent statement that the rand was “in line” with its forex market counterparts. Market and Money have noted that this was due to “an unusual move in rand markets.”
Market and Money notes that, “As soon as the news of the rand’s reversal broke, it became clear to traders on the floor that something had gone horribly wrong.” In the markets and money article, “we see that there are two possible reasons for the rand’s reversal. One is that the rand is experiencing ‘a market condition that was previously unseen in South Africa,’ which has resulted in the reversal in the rand. Or, the reversal could be due to a shift in the global market environment, which will result in negative effects for the rand in coming days.”
Market and Money go on to note that the rand’s reversal could last up to the end of the month. The rand’s market condition is currently described as “risky,” and as a result of the “rising market conditions, the rand is expected to weaken further and weaken in line with its core market counterparts.” Market and Money conclude its analysis by citing comments by a trader, who said that the rand’s trend is “not good,” and is likely to reverse in the next two weeks.
In its market and money article, Market and Money notes that, “our view is that the rand’s reversal is not indicative of a long term economic situation that will have an impact on the rand, but it may indicate that the rand is facing a change in the future that will affect its forex and rand markets.” “The rand is now trading in the market conditions, which indicate that investors are becoming worried about the economic outlook of South Africa,” Market and Money noted.
“Our forecast is that the rand will continue to fall in line with its core market counterparts over the next few weeks as the rand suffers a more challenging market environment. We are also expecting a reversal in the rand’s trend at the end of this week, which may cause the band to break through the psychological level of US $1.40 on either Friday or Saturday, depending on the timing. Our forecast is based on the following factors, namely, the rand strength, market conditions, economic news, political uncertainty, and political uncertainties, market psychology, and the current state of South Africa’s economy.”
In addition to the market and money article, Markets and Money noted that “we will be keeping a close eye on the rand’s reversal as we await the announcement of any possible impact on the rand’s market behaviour,” and that, “it may take a few days to fully analyse the reasons why the rand reversed in the market,” and that, “our view is that the rand could react strongly to this announcement or may be affected by a negative announcement from either the South African government or the Reserve Bank of South Africa.” Market and Money also said that, “We do not expect the rand to break below the level of US $40, and we therefore remain bearish on the rand, given the risk that the rand will follow a downward’s replacement pattern.”
“This should serve as a reminder to the rand market that whilst this reversal in trend may be beneficial at the short term, it could prove more damaging in the long run,” said Market and Money. “For traders holding the rand, this is a situation that may have a significant impact on the price action in the weeks ahead. The rand is a highly speculative financial instrument, and we recommend that those traders who hold the rand stay in the sidelines for the duration of the correction, while assessing the market situation and considering other options.”