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On the wires… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Quote of the day | |||||||||||||||||||||||||||||||||||||||||||||||||||||
“Success is stumbling from failure to failure with no loss of enthusiasm”— Winston Churchill | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The indicators | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Currency crackdown… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Yesterday was fairly quiet in terms of actual FX movement, helped by the UK bank holiday, but there was some flow under the surface. USD/ZAR spent most of the session trapped between R16.10 and R16.20, although the rand’s resilience was on full display. We had renewed fighting between the US and Iran, Brent pushing back above $90, equities under pressure and bond yields moving sharply higher — normally not a particularly friendly combination for the rand.
Part of the support came from the dollar itself, which struggled to hold onto Friday’s gains, but we also got a decent local trade number. SA recorded a R20.1bn trade surplus in July, with exports rising to R194bn and imports falling to R173.8bn. Vehicles, manganese and coal were among the stronger export contributors, which gave the rand a useful domestic tailwind. The big global story remains oil and what it means for inflation. Brent looks to have settled above $90 after the latest US-Iran exchange, which is feeding straight back into the interest-rate conversation. US 10-year yields are now around 4.78%, their highest since January 2025, while markets have moved to price roughly a 70% chance of a Fed hike in September following Warsh’s hawkish Jackson Hole comments.
We are seeing the same move globally — Even Japan’s 10-year yield briefly touched 3% this morning for the first time since 1996. Iran tensions = higher oil = renewed inflation worries = higher rate expectations = higher bond yields = pressure on risk assets. That also explains why US equities struggled despite the softer dollar. The S&P 500, Dow and the Nasdaq all lost some ground, although energy stocks naturally benefited from the oil move.
The rand is ultimately caught between two forces: Strong local fundamentals (Thank goodness) and a relatively weak dollar are keeping it supported. From the other side, oil, geopolitics and rising global yields are working in the opposite direction. We really need the oil price to come down with a quickness, as that would really support our economic story. R16.00 remains the obvious psychological level on the downside — particularly after we traded close to R15.90 last week — while R16.20 remains the first meaningful resistance area. A clean break either side would probably see us hang around there for a while. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
On the radar… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Did you know? | |||||||||||||||||||||||||||||||||||||||||||||||||||||
South Koreans have the lowest bad cholesterol levels in the world. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
All the best,
Kyle Moulster
