Gold and platinum prices are two factors that drive the South African rand; some traders essentially use the rand as a proxy for the world gold market.
Clyde Wardle, senior emerging market FX strategist at HSBC, notes the rand strengthened roughly five percent from June to July.
“It was at 7.20-7.30 in early June and now it has moved below 7.00,” he says.
As of late July, the USD/ZAR was trading at 6.88. Wardle pointed to the rally in the gold market from late June as one factor supporting the rand in recent weeks.
HSBC forecasts overall gross domestic product (GDP) growth at 5.4 percent for South Africa in 2007, vs. 2006’s 5.0-percent reading. Inflation remains high, which has been a driver toward tighter monetary policy. The May CPI ex-food and energy figure posted a 6.4-percent reading yearover- year in South Africa.
“The economy is improving and has been improving for the past couple of years,” Lee says. “GDP and manufacturing are healthy and consumer spending has picked up.
” Wardle adds in the past the South African Reserve Bank had discomfort with currency strength below 7.00 amid worries that it would hurt domestic manufacturing.
“Given rising inflation, the central bank should be comfortable with the strengthening currency,” he says.
Subscribe to:
Post Comments (Atom)
Post a Comment