Pound to South African Rand Exchange Rate Forecast – The South African Rand came under sustained selling pressure

By on March 27th, 2012.
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Pound to South African Rand Exchange Rate Forecast - The South African Rand came under sustained selling pressureThis week’s session has started on a more positive note for the Rand.

Foreign Currency Market Update – GBP / ZAR Update

The South African Rand came under sustained selling pressure as last week progressed, taking the GBP ZAR exchange rate all the way up to 12.2699 during Friday’s session. This was the pair’s highest level since the middle of last month. The move represented a significant rejection of the 6-month low of 11.7624 which GBP ZAR traded down to just two weeks ago.

The near-term rally for the pair looked to be partly technical in nature, as speculators bought back in when it was showing signs of being over-sold following the downside move in the middle part of this month. However, there were also clear fundamental drivers behind the shift out of Rand-denominated assets over the last seven days. As is invariably the case with the risk-sensitive South African currency, exogenous factors, rather than domestic risk events, had the greatest bearing on the relative strength of the Rand last week. Thursday night’s HSBC survey, which showed that activity in China’s key manufacturing base had slowed for the fifth month on the spin, caused institutional investors to shun riskier asset classes, including the Rand. Meanwhile, growing concerns that the parlous state of Spain’s economy might force the Iberian giant to accept a ‘Greece-style’ bail-out, saw the yield on 10-year Spanish gilts rise to above 5.5%, causing a further shift into safe haven currencies by market participants.

This week’s session has started on a more positive note for the Rand, as investors’ confidence levels improve thanks to comments from Chancellor Angela Merkel that Germany is prepared to sign up to an agreement which will see the amount of bail-out funding made available to debt-burdened European states bolstered at the eurozone Finance Ministers’ meeting in Copenhagen on Friday. Merkel’s comments have caused the yields on Spanish bonds to drop, and if the eurogroup summit does indeed bring a commitment to increased funding for states such as Spain, then appetite for risk is almost certain to strengthen ahead of the currency markets’ weekend close. The Rand will benefit from such a scenario, which would be likely to spark a renewed run at GBP ZAR’s key interim floor of 11.7624 in the near-term.

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Summary of major upcoming data releases that we think may move the market.

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