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Below you will find a daily finance and markets review provided by Rand Merchant Bank analysist John Cairns. This information is provided as a matter of interest to readers of this blog, should you be interested to receive further information and insight you may register through RMB directly. Thanks, Ed
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Please find your Currency Daily attached.
TODAYS EXPECTED RANGES:
- USD/ZAR: 7.85 – 8.05
- EUR/ZAR: 11.00 – 11.25
ZAR GAINS ON USD RUMOURS AND RENEWED RISK APPETITE
The debate over whether the USD should retain its super-sovereign reserve currency status, wages on. China continues to voice its concern over the dominance of one currency within global markets and is currently in talks with its BRIC counterpart Brazil, to establish a currency agreement which will allow importers and exporters to settle transactions in their local currencies. The USD managed to gain some composure after the Chinese comments filtered through the market, but the anaemic performance of US equities kept the unit on the back foot.
The softer USD, together with a renewed appetite for risky assets continues to support USD/ZAR which remains buoyant around 7.92. The ZAR has the potential to strengthen further should it breach 7.90, which appears to be a key support level, but there is little in the way of local or international data that could possibly jar the unit today. Event risk is evident further in the week with SA trade data due tomorrow. We expect a deterioration in the trade deficit, in line with 1Q09 current account figures but note that the data is very volatile. We also look to the stream of global manufacturing data which is likely to reflect further signs of stabilisation within the global economy. However, the outcome of US non-farm payrolls on Thursday could indicate a worsening in the US job market and re-ignite investor concern. Overall, we expect the ZAR to remain relatively rangebound today.
THE CROSSES:
- EUR/ZAR looks to trade within a range of 11.00 – 11.25 today as EUR/USD holds above 1.40.
- Even though GBP/USD is trading steadily above 1.64, a stronger ZAR is likely to keep GBP/ZAR around 13.10.
- ZAR/JPY remains rangebound and is teetering around 11.95.
OTHER NEWS
- Japans industrial output rose 5.9% in May mainly due to a rebound in vehicle and electronic production. The figure is expected to increase consistently over the next few months as manufactures replenish their stocks after downsizing their inventories, at the onset of the crisis.
- Vodafone is exploring a bid to purchase T-Mobile UK. The acquisition means that Vodafone would dominate the British mobile market and collect 40% of revenue paid by users in the UK.
- According to the UN Commission for Trade and Development the steel industry is facing its worst demand downturn since the oil crisis of 1974-1975.
- The IMF has warned that Frances current fiscal policies could lead to unsustainable debt dynamics. They also stated that the economic situation in Central and Eastern Europe is likely to impact the performance of French banks going forward.
Today’s daily was written by Nema Ramkhelawan.
Kind Regards
John Cairns and Nema Ramkhelawan
Financial Markets Research: Currency
Fixed Income, Currency and Commodities (FICC)
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