The Pound Sterling to South African Rand (GBP/ZAR) advanced by more than 1% on Thursday as data out of Africa’s most developed economy disappointed. Concerns over Greece worries over a build-up of Russian troops on the Ukrainian border and expectations that the US Central Bank will hike interest rates this year also weighed on the emerging market currency.
The Pound Sterling to South African Rand (GBP/ZAR) reached a session high of 18.6370
Against the US Dollar (USD), the South African Rand fell more than 1.3% as it tracked other emerging market assets lower.
Currencies like the Rand, Indian Rupee (INR) and Russian Ruble (RUB) all fell after a report said that capital flows will fall because of higher US interest rates.
Positive data out of the world’s largest economy added to expectations for a rate rise occurring this year.
Also weighing upon the South African Rand was news that South Africa fell to 53rd out of 61 in the IMD world competitiveness rankings as the efficiency of the nation’s government and business declined.
Competitiveness rankings are often used by potential investors to decide on whether a nation is an attractive location to invest in.
‘South Africa’s challenges included deteriorating education and high youth unemployment, corruption, lack of capacity in electricity generation and distribution, and an insufficient supply of skilled engineers and technicians. We need good government policy, good regulation and good investment infrastructure. A lot of work needs to be done on regulation and transparency,’ said IMD World Competitiveness Centre Director Professor Arturo Bris.
PPI Data and Geo-political events Weigh
Also weighing upon the South African Rand was the release of a report, which showed that Producer Price Inflation (PPI) fell in April. On a month-on-month basis, PPI slowed from the preceding month’s figure of 1.8% to 0.9%. The figure was below economist forecast for a rise of 1.1%. On an annual basis, PPI rose 3.0%, below the previous figure of 3.1% and below expectations for 3.35%.
Adding to the Rand’s woes, was data out of the USA, which suggested that the US labour market is continuing to strengthen, and showed that pending home sales increased to a nine-year high last month.
Geopolitical events are forecast to keep the Rand under pressure on Friday. Worries over a possible Greek default and signs that Russian forces are amassing on the Ukraine border are likely to knock sentiment towards riskier assets.
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