Having a look at the Weekly Chart of the USD/ZAR, one met get the idea that the whole "US Dollar Weakness" theme is fading.
The last few weeks have shown the Rands resilience against the Dollar, however this is once again being put to the test.
With commodity prices have seemingly had their "heyday", emerging market currencies (such as the Rand) may begin to feel the brunt of this. One only needs to look at the supply chain debacle haunting the markets & imagine that the demand for raw materials (commodities) will fade alongside manufacturing orders. My logic is simply that manufacturing will slow until the global supply chains are rectified.
We could therefore potentially be seeing the beginning of a new cycle in favour of the US Dollar.
By plotting the VWAP since the previous lows in 2019, through until today, we see that a value of about R15.65 to the Dollar looks to be what the market is currently demanding.
As trade deficits and surpluses normalise, one might imagine the USA GDP recovering (& expanding) faster than that of South Africa's in 2022.
Bond yields may just begin to stabilise & emerging market bonds will fall out of favour.
While it's certainly not a doom & gloom scenario for the Rand, one must remember that we've been at these levels before (and survived).
This round however may just go in favour of the USA.
While I do not foresee a full collapse of the Rand back toward R16.35, I do think it remains prudent to plan for an over-reaction.
In the event that "Dollar Bulls" turn-tail and head home to Kansas, perhaps the market may demand a more lenient R14.35 for the American Greenback.
All that being said, I'm of the view that the US Dollar may just have the "Upper Hand" going into 2022.
The last few weeks have shown the Rands resilience against the Dollar, however this is once again being put to the test.
With commodity prices have seemingly had their "heyday", emerging market currencies (such as the Rand) may begin to feel the brunt of this. One only needs to look at the supply chain debacle haunting the markets & imagine that the demand for raw materials (commodities) will fade alongside manufacturing orders. My logic is simply that manufacturing will slow until the global supply chains are rectified.
We could therefore potentially be seeing the beginning of a new cycle in favour of the US Dollar.
By plotting the VWAP since the previous lows in 2019, through until today, we see that a value of about R15.65 to the Dollar looks to be what the market is currently demanding.
As trade deficits and surpluses normalise, one might imagine the USA GDP recovering (& expanding) faster than that of South Africa's in 2022.
Bond yields may just begin to stabilise & emerging market bonds will fall out of favour.
While it's certainly not a doom & gloom scenario for the Rand, one must remember that we've been at these levels before (and survived).
This round however may just go in favour of the USA.
While I do not foresee a full collapse of the Rand back toward R16.35, I do think it remains prudent to plan for an over-reaction.
In the event that "Dollar Bulls" turn-tail and head home to Kansas, perhaps the market may demand a more lenient R14.35 for the American Greenback.
All that being said, I'm of the view that the US Dollar may just have the "Upper Hand" going into 2022.
Comment:
Hi all. I have updated my analysis in a Post titled, "A Tough Act to Follow".