As anticipation surrounding the publication of minutes from the Federal Open Market Committee’s latest policy meeting grows, emerging market currencies are enduring a pretty brutal beating.
India’s Rupee has smashed through historic lows to trade at an unprecedented 64 Rupee per Dollar, and as the local session progressed South Africa’s Rand fell against the Pound as well as tumbling to a six-week low against its North American rival.
At the current exchange rate 1 Pound will purchase 15.9517 South African Rand as of 10:50 GMT
The Rand extended declines against the majority of its peers overnight, consolidating losses beyond the psychological 10 Rand per Dollar level.
While speculation regarding the Fed minutes is weighing on the Rand, the currency is also feeling the pressure as a result of wage strikes in the auto industry.
According to comments issued by Tradition Analytics, emerging market assets ‘are starting to be punished more heavily for running interest rates that are too low and current account deficits that remain too wide. South Africa shares this status and there is reason for continued underperformance of the Rand as the strike action intensifies.’
The GBP/ZAR exchange rate hit a high of 16.0326 Rand per Pound
Tradition Analytics added: ‘While the upside move on Dollar/Rand has run quite far in a short space of time, any technical pull backs are likely to be short-lived with few factors in favour of a meaningful Rand recovery at this stage.’
Some investors are expecting tomorrow’s Fed minutes to hint at a potential timeline for tapering quantitative easing. If they imply that tapering could begin in September, as forecast, the US Dollar could rally and emerging market currencies may fall further still.
However, there was good news for South Africa today as the nation’s leading indicator extended gains in June. The composite leading business indicator advanced 2.4 per cent year-on-year in June, following on from May’s increase of 2 per cent. The result bodes well for domestic growth, although investors will of course be looking ahead to tomorrow’s South African inflation data and next week’s growth figures.
Current South African (ZAR) Exchange Rates:
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The US Dollar/South African Rand Exchange Rate is currently in the region of: 10.1725 >
The Pound Sterling/South African Rand Exchange Rate is currently in the region of: 15.9517 >
The Euro/South African Rand Exchange Rate is currently in the region of: 13.5836 >
The Australian Dollar/South African Rand Exchange Rate is currently in the region of: 9.2823 >
The New Zealand Dollar/South African Rand Exchange Rate is currently in the region of 8.1212 >
The Canadian Dollar/South African Rand Exchange Rate is currently trading in the region of 9.8315 >
(Correct as of 10:50 GMT)
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