It has been a painful trading week for the South African Rand which is currently on track to securing the title as worst performing emerging market currency since Monday, after suffering weakness by roughly 2.63%.
The USDZAR touched its highest level since October 2018 earlier this morning as the perfect storm of market risks rapidly eroded appetite for the South African Rand. One thing is for certain, the Rand is clearly unamused by headlines that David Mabuza is in the running to become re-appointed as Deputy President and this continues to reflected in the currency’s valuation. When factoring in how Mabuza has previously been previously linked to a number of scandals that have taken place, these reports that he re-appointed as deputy president are raising questions over Cyril Ramaphosa’s efforts to end corruption as stated during his inauguration speech as South African President on Saturday.
Emerging market currencies feel the heat
Persistent US-China trade tensions, Brexit and concerns over slowing global growth have certainly left a mark on emerging market currencies. The general lack of appetite for risk amid the growing uncertainty has offered nothing but pain to most major EM currencies this week. With the mood across financial market negatively impacted by geopolitical risk factors and risk-off becoming a recurrent theme, this will spell trouble for EM currencies in the short to medium term.
Commodity spotlight – Gold
One would have expected Gold prices to push higher given how trade concerns and Brexit continue to accelerate the flight to safety.
It seems investors are rushing towards the Dollar instead which is still seen a prime destination for safety in times of uncertainty and unease. While Gold is positioned to remain buoyed by risk aversion, upside gains will most likely be limited by an appreciating Dollar. The precious metal is poised to swing back and forth within a modest range until some sort of catalyst is brought into the picture. Technical traders will continue to closely observe how Gold behaves above the $1280 support level. Should this level prove to be reliable support, prices have the potential to appreciate towards the psychological $1300 resistance.
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