Before South Africa’s producer price index was published – the nation’s main piece of economic news for the week – the Rand was softer against the Pound and continued to trade in a tight range against the US Dollar.
The Pound Sterling/Rand exchange rate is currently in the region of 16.0149 as of 11:30 GMT
The Rand slipped slightly against its British counterpart after the Pound was boosted overnight by a stronger-than-expected UK consumer confidence index, but held relatively steady against the ‘Greenback’.
However, potential strikes in the mining sector, domestic economic weakness and US news were all piling pressure on the South African asset.
As Absa Capital noted in its morning report; ‘The Rand is once again on the back foot and could weaken further today if this afternoon’s US labour data prove to be better than expected. An elevated domestic PPI reading today could also hinder the Rand if it prompts foreign investors to shed more South African bond holdings.’
Sure enough, after the producer price inflation data was published, the Rand declined.
According to figures compiled by Statistics South Africa, domestic PPI jumped from 6.6 per cent in July to 6.7 per cent in August, year-on-year.
Economists expected inflation to decline to 6.5 per cent.
Month-on-month producer price inflation increased 0.8 per cent.
With pressure on consumer spending already high, this result reinforces the opinion offered by Reserve Bank of South Africa Governor Gill Marcus last week.
Marcus asserted that a weak Rand is adding to inflationary risks and leaving the central bank struggling to impose policy which will both boost slowing economic growth and keep consumer-price inflation on target.
The GBP/ZAR exchange rate hit a high of 16.0773 Rand per Pound
Although the Pound broadly softened after UK GDP failed to meet estimates, the Rand still declined against its British rival.
With US initial jobless claims, GDP and personal consumption reports all due for release during the North American session, additional USD/ZAR movement can be expected. If the US economy is shown to have expanded by more than initially estimated in the second quarter the Rand may well extend declines and could even weaken beyond the psychological 10 Rand per Dollar level.
Current South African (ZAR) Exchange Rates
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The US Dollar/South African Rand Exchange Rate is currently in the region of: 9.9710 >
The Pound Sterling/South African Rand Exchange Rate is currently in the region of: 16.0773 >
The Euro/South African Rand Exchange Rate is currently in the region of: 13.4752 >
The Australian Dollar/South African Rand Exchange Rate is currently in the region of: 9.2989 >
The New Zealand Dollar/South African Rand Exchange Rate is currently in the region of 8.2170 >
The Canadian Dollar/South African Rand Exchange Rate is currently trading in the region of 9.6306 <
(Correct as of 11:30 GMT)
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