Market Trends June 2012
• ZAR under extreme pressure ,and risk volatility remains high
• Greece playing havoc with markets, Asian/Aussie markets all down
• ZAR tracking Euro after rumors of Central Bank Intervention
The rand weakened in late afternoon trade on Thursday to breach six-month worst levels as it touched 8.5820 on emerging market risk aversion in the wake of the E C debt crisis. The ZAR made a slight recovery in early trade after losing 2.5 percent the day before when it reached a six-month low of 8.5375 on concerns over the E C debt crisis.. The euro was bid at US$1.2389 from Wednesday close of $1.2368. The PPI numbers released earlier had little impact on the currency. SAs April producer inflation reading came in at a lower than expected 6.6 percent from 7.2 percent in March. Statistics SA data showed. PPI was up 0.3 percent on the month while export inflation rose 5.3 percent on the year but went down 0.2 percent on the month. Later in the afternoon trade statistics were released SA recorded a trade deficit of R9.9 billion for its trade with non-Southern African Customs Union trading partners in April after a R5.5 billion deficit in March‚ according to customs and excise figures. There was a decrease in exports of R9.2 billion (14.9 percent) to R52.2 billion and a decrease in imports of R4.8 billion (7.2 percent) to R62 billion. The local data didn’t move the markets not much really happened today.
The volatile rand was weaker today as it tracks international markets specifically the Euro which is nowhere out the quagmire yet. So it’s not surprising that safe-haven assets are being bid again today. Once we have certainty around Greece, and this will probably not come with next month’s Greek elections, Global markets and the rand should stabilize and we may resume the stronger rand environment of the previous view years. The market is very jittery right now, so the flight is into safe havens such as the US dollar and Swiss Franc, who are the benefactors at present. My view is we will be at these levels for a few days. Trading range for me 8.02-8.50.Exporters must take advantage of these rate and % sell their proceeds as the ZAR gets weaker. I think there must be some retracement and respite for the ZAR as it has run along way now and we should see some profit taking and sanity come back again. I am not looking for a whole lot but as previously stated there is more to the market than just the EC zone. We have the USA who also have their problems but at present it is been overshadowed by the Sovereign debt crisis. The market is fickle and we will see it turn its attention on the USA and then the reverse will occur. All eyes will be on the USA as nonfarm payrolls data is released ,which of late figures in US have not be strong.
The ZAR reached 8.66 and was not long at these levels when rumours circled the market that there was Central Bank intervention across the board to assist the Euro. The euro went from1.2290 to 1.450 in minutes and the ZAR tracked with it back to the 8.50 levels. This will now have the market players very nervous and all long dollar positions will start to be cleared out.