Forex Morning Commentary 29th January 2009

Gut Feeling

The ZAR has stalled at these levels around 9.8500 as the US$ comes under pressure. The appetite for risk aversion has risen as the markets are bouncing back daily assisting the emerging markets. I still think the level of 9.85 looks a bit bottomish and I expect the ZAR to make a move to the 10.05 levels. The ZAR will still remain on the back foot, for as long as we have the huge trade deficit. The trading range once again for the ZAR seems to be 9.75 to 10.40. It is still a bit premature to turn positive on the ZAR as there is still a lot of uncertainty in the global market and it seems that the moves are a bit more even. A rate cut is on the cards and market sentiment is a 50 bp cut. Any bigger cut would affect the foreigners looking at investing into South Africa, which in turn would assist our trade deficit. A cut contrary to the past of weakening the currency would strengthen as the market interprets it as a stimulus for the economy. The world is gaining confidence in the Obama administration as the stimulus package of USD 900 billion is closer to congressional approval.

Data Releases

Thursday           SA M3, PSCE, Trade Stats

Friday               US GDP, NAPM

Rates

USD / ZAR       9.8525/9.9025

EUR / ZAR       12.9585/13.0585

GBP / ZAR       14.0050/14.1050

ZAR / JPY       9.0407/9.0807

EUR / USD      1.3115.1.3125

GBP / USD      1.4158/1.4168

USD / JPY       89.19/89.29

Morning Commentary