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|01 November, 2018

Why the Rand stands as the biggest emerging market loser

Jameel Ahmad is the Global Head of Currency Strategy and Market Research at FXTM, having joined the company in May 2014 as Chief Market Analyst. He specialising in financial market developments, with a particular emphasis on global currencies, commodities and emerging markets. He holds a BA (Hons) degree in Business Studies with Accountancy & Finance from the University of the West of England. He recently completed an executive education course in Unconventional Monetary Policy at the Barcelona Graduate School of Economics.

Website: www.forextime.com

South African currency stands as the biggest EM loser following balance of trade report

The South African Rand stands at time of writing as the biggest loser amongst emerging markets currencies today (Wednesday, October 31) with losses of 1.56 percent, after South Africa’s latest balance of trade report unexpectedly showed slowing export growth.

The recently-announced trade balance data for September has essentially resumed selling pressure on the Rand. The market is not pleased with the news that export growth fell by 2.6 percent month-on-month, with the essential factor to consider that slowing export growth at a time where the domestic economy is in a technical recession is never a positive sign for any global economy.

Figures like this do suggest that external uncertainties, such as the prolonged trade tensions and warnings from respected institutions like the IMF that global growth has potentially “plateaued” is a problem for emerging markets in particular.

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Overall, I wouldn’t read too much into a one-off data release, but investors would be mindful to monitor the upcoming economic releases from South Africa for validation behind why exactly the Finance Minister downgraded the South African economic growth outlook so sharply from 1.6 percent to 0.7 percent.

If further economic releases from South Africa provide an explanation to why the growth outlook for the country was sharply revised lower during the medium-term budget statement one week ago, it does risk weighing further selling momentum on the Rand.

One factor that is also not helping the Rand over the near-term is the news of the Dollar edging to further 2018 high’s at time of writing. Dollar strength remains as a major challenge to emerging markets.

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