A few weeks ago, I wrote about the South African Rand performance against the dollar (article). In the article, I predicted that the pair would continue to drop if Cyril Ramaphosa took over the ANC party. He did, and the pair continued to drop to below my target price of 12.31. Today, helped by a weaker dollar and optimism in South Africa, the pair is trading at a price slightly above the target level.
This year, the pair will likely be driven by politics as investors digest the happenings in the country. Some expect that Ramaphosa will fire Jacob Zuma who has brought down the country and who seems to have lost the support of the electorates and the country at large. He continues to face multiple corruption cases.
This will not be the only factor to watch. A key component of South Africa’s economy is commodities. It is a major exporter of precious metals like gold, platinum, and palladium as well as other agricultural commodities. This year, commodities have started the year at a high note with gold reaching a 3-month high. The Bloomberg Commodities Index has reached a 10-month high.
This coupled with a potentially weaker dollar could lead the South African Rand higher.
Today, traders will watch out for ADP to release its employment change numbers. Traders expect that the company will report an employment change of about 191K and the jobless claims to drop to 241K. Tomorrow, we will receive the non-farm payrolls, unemployment rate, and wage growth. Traders expect 191K, 4.1%, and 0.3% respectively.
As shown below, the pair has been trading in a sideways direction. Traders will be waiting for the data later today.
For the year however, I believe that the Rand may continue to be strong against the dollar.