Good morning,

On the wires…

·         JSC rejects impeachment recommendation for judge who helped former in-laws

·         Cape Town travellers in limbo as taxi disruption triggers major flight delays

·         US plans to ban Chinese telecom firms from direct access to US phone numbers

·         Egypt’s central bank makes first rate hike since March 2024

·         Antonelli struck with illness ahead of Mexico GP

·         Harmer hopes to do ‘something spectacular’ for Proteas on deteriorating Newlands wicket

Quote of the day

“I like work; it fascinates me. I can sit and look at it for hours” ― Jerome K. Jerome

The indicators

Currency crackdown…

FXOne would like to thank Claude Pro for its unbiased contribution to the comment this morning.

The rand weakened over the week and is trading at around R16.63 to the US dollar at the time of writing, compared with about R16.37–16.41 at the start of last week. The main driver was a firmer dollar. Markets have pushed back expectations of US rate cuts, and the dollar has strengthened against a broad basket of currencies. Over September as a whole, the rand fell more than 2% against the dollar, so this week’s weakness follows several soft weeks rather than a single event.

Key moves this week:

• On Monday, the rand was steady at around R16.61 while investors waited for domestic data and the Fed decision.
• On Wednesday, the rand was under pressure in early trade as higher oil prices fuelled inflation concerns, with the Fed decision still pending.
• On Thursday, the rand weakened after the Fed held rates. Gold and platinum prices fell, and faster producer inflation added to concerns about the domestic outlook.

Current influences:

• US rates and the dollar: The Fed held rates steady, but markets remain focused on tightening. Traders largely expected no change this week but priced in an 84% chance of a December rate hike. A stronger dollar tends to weigh on emerging-market currencies like the rand.
• Interest rate differential: The gap between US and South African rates drives carry trade flows, where investors borrow in low-yielding currencies to invest in higher-yielding ones like the rand. With US rate expectations rising, that gap is narrowing in the dollar’s favour.
• Oil and the global energy shock: Nedbank economists said the global energy shock is the main pressure point, with Brent staying above $100 a barrel on Middle East supply concerns. Higher oil prices are a particular drag on South Africa as a net energy importer.
• Commodities: As a major exporter of gold and platinum, South Africa is sensitive to commodity prices, and both fell this week.
• Domestic inflation: Producer inflation accelerated to 6.2% year-on-year in September, up from 5.0% in August. The SARB expects inflation to average 4.4% in 2026 and to return to its 3% target only in 2028.
• Global risk sentiment: Markets were jittery this week over high tech spending and talk of an AI bubble. When risk appetite falls, emerging-market currencies like the rand often weaken.
• Local policy: The SARB repo rate is 7%, following a hold at 7.0% in July. The next SARB policy decision is scheduled for 19 November 2026.
• Fiscal policy and credit rating: The mid-year budget review was expected to show an improved fiscal outlook, supporting the government’s push to regain an investment-grade credit rating. A credit upgrade would support the rand, while a fiscal setback would weigh on it.

Outlook: Some analysts expect the rand to stay under pressure while oil and US rate expectations remain elevated. ETM Analytics said the rand could weaken beyond the 17.00-per-dollar level if rising oil prices and Fed-related pressures persist. The key events to watch are the next SARB decision and any movement in oil prices and US rate expectations.

On the radar…

• GBP – Nationwide HPI
• EUR – GDP
• EUR – Unemployment Rate  (Sep)

• All – Iran/US/Middle East developments
• ZAR – Budget Balance (MoM) (Sep)
• ZAR – Trade Balance  (Sep)

Did you know?

The pinky finger is a major contributor to grip strength, often estimated at 30-50% of your hand’s power when working with the ring finger.

Happy Friday, have a good one!