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Some respite for the rand as it rallies stronger

by , 25 February 2014

Yesterday, the rand rallied strongly against major currencies after battling to keep close to R11 to the dollar level last week. Helping the rand out was some easing of aversion to emerging markets after unrest in the Ukraine calmed down. Let's take a closer look at what's going on with the local currency…

This year hasn’t been kind on the rand. It’s lost its battle several times against the dollar, falling past the R11 to the greenback level.

But yesterday saw a rally in the local currency, as it gained for the third straight day, notes Bloomberg.

Taking the pressure off emerging markets was the news of “some resolution to Ukraine’s political crisis,” reports IOL. At the weekend, the Ukrainian parliament removed the president. And it’s trying “to mend relations with the European Union [EU]”.

The EU and the US “pledged aid for a new interim cabinet in the Ukraine, which is in need of $35 billion to avoid a default,” says BDLive. With the pressure off emerging markets for now, the rand manage to “settle within the R10.80/$ to R11.10/$ range”.

The release of GDP could signal the rand’s next move

Today is the start of the release of “key data” for South Africa, notes IOL. Today, gross domestic product (GDP) figures are due out for the final quarter of 2013. Time will tell how economic growth fared over the period.

A survey conducted by Bloomberg of 21 economists predicts growth to come in at 3.4% for the quarter. That would be an increase of 0.7% from the third quarter of 2013.

And on Wednesday, the Finance Minister Pravin Gordhan will release the budget, reports Fin24. It’s “likely to show restraint” despite Mr Gordhan’s party, the ANC, preparing for elections in May.

A strategist at Standard Bank, Bruce Donald, says that if today’s GDP figures are strong, is should be “rand positive,” notes Bloomberg. The budget can have consequences on the rand depending on “any consequences it has for perceptions of creditworthiness and thus debt ratings,” Mr Donald added.

At time of writing, the rand was trading at 10.79 to the dollar, 14.82 to the euro and 17.97 to the pound.

We will find out later today the rand’s reaction to GDP when Stats SA release the figures. They are due out about 11.30.

Some respite for the rand as it rallies stronger
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