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Not much important data for ZAR coming this week mean it will mainly be driven by mining commodities prices - especially gold and silver- and the outstanding prime rate of 10.5%. Both of those (gold and silver, though rates are suprisingly also in bullish trend) are in strongly bullish trend giving a strong support for ZAR appreciation. Some weakness in EURO also helps ZAR a little.
Prime rate at 10.50% allows sustainable carrying of the position and should also attract investors. CPI and PPI are at the highest zone targeted by Resbank - 6.1%CPI and 6.5% PPI which means they will very likely have to hike rates again. The big factor for extra inflation and need of rate increasing are food prices that increased by 11% (MPC statement 19 May 2016). Some extra oil price adds even more inflation. General outlook of the economy in the opinion of Resbank is mixed, yet rather positive for the near-term.
There is an interesting fact of South Africa planning to start its own rating agency due to not agreeing with American agencies' low ratings for RSA. It is difficult to predict the outcome of that one.
Generally, there are many fundamental reasons behind ZAR appreciating versus majors lately and there still still a lot of space for further movements. Additionally, if Rand depreciates, inflation will increase, leading to further rate increase. Whatever would happen in the future, rate hikes on ZAR seem imminent.
Important rates (source: South African Reserve Bank)
Prime rate at 10.50% allows sustainable carrying of the position and should also attract investors. CPI and PPI are at the highest zone targeted by Resbank - 6.1%CPI and 6.5% PPI which means they will very likely have to hike rates again. The big factor for extra inflation and need of rate increasing are food prices that increased by 11% (MPC statement 19 May 2016). Some extra oil price adds even more inflation. General outlook of the economy in the opinion of Resbank is mixed, yet rather positive for the near-term.
There is an interesting fact of South Africa planning to start its own rating agency due to not agreeing with American agencies' low ratings for RSA. It is difficult to predict the outcome of that one.
Generally, there are many fundamental reasons behind ZAR appreciating versus majors lately and there still still a lot of space for further movements. Additionally, if Rand depreciates, inflation will increase, leading to further rate increase. Whatever would happen in the future, rate hikes on ZAR seem imminent.
Important rates (source: South African Reserve Bank) 