Forex Commentary 02nd March 2009

Forex

Gut Feeling

I have previously stated that risk aversion will be the flavor again and soon and true to my words it has and has affected all emerging markets. Another big factor in the ZAR weakening on Friday was the huge trade deficit. This will always affect our currency and with the worldwide crisis, I cannot see our trade deficit narrowing. The trading range once again for the ZAR seems to be 9.75 to 10.40. Market must exercise caution, as there is a lack of direction both ways. Keep an eye on Gold over the next few months as a safe haven commodity. Gold has certainly kept in tune with all the turmoil in the market and I see the gold price above US $ 1000.00 although it has come back somewhat. Importers if they did not cover will have missed some cheap US$ and should wait and look for the ZAR to come back through the 10.000 level. This will happen but for now I see the ZAR a bit weaker. I like to stay long of US$ below 10.0000 and sell US $ over the 10.20 level. I think as the market unravels all the bad data both in USA and Europe risk aversion will play a major part in the weakening of emerging market currencies. I think Tito Mboweni will soon be looking to call an early MPC meeting for an early rate cut, I think that it should not be discounted and there is a possibility of this meeting taking place before April, which is the date set for the meeting. A market consensus has shown that before year end they looking for a 350 basis point cut. My prediction is that the ZAR will once again need to break through the 10.23 level decisively and if so 10.40 is on the cards. Friday keep a watch out at trade figures.

Data Releases

Monday             US Core PCE, Personal Income, Constr Spending

Tuesday            SA Vehicle Sales,

Thursday           US Jobless Claims, Factory Orders,

Thursday           UK and ECB Rate Cut

Friday               SA RESERVES    

Friday               US Non Farm Payrolls

Rates

USD / ZAR       10.2180/10.2380

EUR / ZAR       12.8798/12.9198

GBP / ZAR       14.5728/14.5928

ZAR / JPY       9.5348/9.5548

EUR / USD      1.2605/1.2615

GBP / USD      1.4250/1.4260

USD / JPY       97.50/97.60

Morning Commentary