It’s not just the British Pound feeling the impact of political instability of late, the South African Rand has hit a year-low versus the US Dollar (ZAR/USD) as it dropped by over 1.0% on Monday.
South African President Jacob Zuma reportedly wants to bring in free higher education – a move that would place further pressure on public finances. This morning the South African Rand exchange rate dropped to its lowest level against the US Dollar (USD/ZAR) since May 2016, at 14.52.
In addition, senior Treasury official Michael Sachs has resigned from his post, and there are also rumours that Gwede Mantasche, ANC secretary-general is feeling the pressure too. The news comes at a bad time for South Africa which is due to be visited by credit rating agencies next week. With the political chaos taking place and jittery markets, it looks as if there’s a high chance the nation will be downgraded to junk status. If this does occur, the Rand will be left vulnerable and other currencies such as the Pound and US Dollar could climb against it. During Monday’s European session, despite being down against plenty of other currency majors, the Pound Sterling managed to climb against the Rand (GBP/ZAR) by around +0.50%.
Meanwhile, Stateside data is expected to heat up mid-week which may influence the US Dollar. The US Consumer Price Index for October is expected on Wednesday and forecast to dip slightly from 2.2% to 2.0% on the year. Meanwhile, Advance Retail Sales are predicted to disappoint at 0.0% in October after the previous month’s 1.6%.
US Industrial Production, Manufacturing Production, and Housing Market Index numbers are all due out on Thursday, followed by Housing Starts, Building Permits, and the Baker Hughes Rig Count stats on Friday.
The US Dollar to South African Rand (USD/ZAR) exchange rate is currently trending at levels of 14.5050.