Market Forecast - Sterling Vs. South African Rand 31/08/10
It’s not surprising to see this market enjoying a relatively stable period. The dominant theme in the markets right now is that there are two major currencies in play. The US dollar…and everything else! As evidence of a new economic slowdown continues to weigh on sentiment, investors have been moving assets into the “safe haven” of the dollar, and selling other currencies. This usually impacts the higher yielding currencies most, but in the current climate it happens to be economies like Australia and New Zealand that are doing better than the UK and Europe. They also offer a decent yield, and more importantly, that means there is more room to cut interest rates if the economic outlook deteriorates. These factors have helped the high yielders keep pace with the Pound and Euro over recent weeks despite their racier credentials.
South African second quarter GDP came in at 3.2% last week, less than the 3.7% expected, but still growth. The Rand hardly flinched. The softer data means the Reserve Bank is likely to cut interest rates in September from the current 6.5%. They last cut rates in March from 7%.
This market has been trading in a relatively tidy range for the last few months. The top of the range is 11.75, and the bottom is just below 11.00. We’ve spent the last few weeks in the upper half of the range above 11.25. In general terms that is encouraging and we would only become concerned if the interbank rate slips below 11.25.
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Analysis provided by TorFX
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