The Rand Rallies and the Pound is on the Backfoot!!

well time to buy some pounds me mates!!!

Sterling is still on the back foot here, failing to make any convincing breaks above the 11.75 resistance zone.

We've been up to that level three times in the last three months, and failed on every occasion. Things looked a little better on Friday after the Pound shot out of the blocks on unexpectedly strong GDP figures. Growth in the second quarter came in at 1.1% compared to the 0.6% expected.

That's good news by any measure, and helped to back up the positive retail sales data released the previous day. The problem is, all this supposed good news is adding weight to the case for a general global recovery, which in turn prompts investors to buy the higher yielding currencies like the Rand. Sterling does benefit from strong domestic data, but when everything settles down the high yielders tend to come out on top. The results of the European bank stress tests were also released on Friday, showing that only seven regional banks failed to make the cut. All UK banks passed. Again, more evidence that the world economy is finding its feet. The Rand rallied yesterday as speculation grew that HSBC would acquire South African firm Nedbank. The deal would require the purchase of a significant tranche of South African Rand, which helped the currency tick higher against other units.

In other news, the South African central bank kept interest rates unchanged at 6.5% last week. The last change was on March 25th when they cut rates by 0.5%. Analysts expect them to remain on hold for some time to come.

The technical outlook is negative. The UK has recoiled from the 11.75 level and now look set to sell off back to the 11.05 level that marked the late June low.

Buyers of the Rand should consider hedging any exposure now.

MPC keeps repo rate unchanged

The Monetary Policy Commitee decided not to change the repo rate, feeling vthat the current monetary policy is well enough.

Some points they focussed on, included risks that are still in place, even though the debt crisis in Europe started looking better, as well as the Bank's inflation trajectory, expecting to be 4.5% for Q3.

The Bank also gave their view on the level and volatility of the rand exchange rate, devoting themselves to limiting the rand volatility, but not setting any goals.

Economic growth of 2.9% is expected for 2010, which is low, considering the market concensus of 3.3%, owing to the downside risks faced by the manufacturing sector. The Bank also highlighted the weakness in business confidence and the construction sector.

Finally, the Bank said that the strong household spending trend in Q1 is expected for Q2 as well, but the outlook is not that clear due to conflicting signals.

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DEBT LEVELS STATISTICS 2010

With over 18 million active consumers in the marketplace, there is R 1,1 trillion worth of credit being offered by 4,120 credit providers and 34,000 branches nationally.  This is a big market.  But, there are 1,682 debt counsellors - so definite signs of debt management, increased debt loads and more money required by consumers. Nearly 50,000 people are being added per month as "impaired" credit clients.

No need to hide away in your shell, unless you are a cancerian!!

So, is this a good time to send your money to SA and invest in SA.

Well the answer is yes. Our banks are relatively stable in this first tier and second tier economic swing.
South Africans are great spenders.  The country has great investment opportunities with still good returns.  look at gold, platinum, consumer goods, organic foodstuffs, wine and technology.  we still have SA reserve Bank constraints in terms of money flow, however, the desire and demand for foreign currency remains high and you can bring in money without paying any transfer fees, so it need not be a stumbling block at all.

Kenaka - it is time - to transfer your money free to SA.
email me at forex@globalfundi.com for your personal forex dealer.

Fall in Gold hurts the Rand - eeish!

Painfully hurting the Rand yesterday was a 4% fall in the gold price. This allowed UK sterling to capture the key technical resistance just above 11.50, which should open the way to further upside in the short term. The next noteworthy resistance level is 12.05.

The Sterling/Rand rate was given a second shot of adrenalin as world stock markets took a major dive last week, driven lower by fears of a Chinese and US slowdown. A string of negative US data including jobless claims and poor manufacturing numbers meant that US stocks closed at a new 8 month low last night, stoking fears of a deeper correction that could keep investors looking for safe havens over the near term. That sense of investor risk aversion sent the Rand sharply lower over recent days as traders sell high yielding currencies and move money into the Yen and US dollar, a phenomenon known as a "flight to quality". This reaction has been seen several times over the last few years. Every time the markets hit a major hurdle, the high yielders plunge. However, so far these currencies have always recovered to new highs against both sterling and the US dollar once the fog clears and investors renew their search for a decent yield (The Rand offers 6.5% compared to just 0.25% in the US and 0.5% in the UK).