A day after breaking through to below R19/$ for the first time in almost a month, rand strength continued with a sustained break below R18.90. While it is still far off its levels before the Russian arms crisis, it has now gained more than 4% over the past week.Investec chief economist Annabel Bishop says the currency could run stronger towards R18.75/$, although it is hitting key resistance levels.
The International Criminal Court has issued a warrant for Russian President Vladimir Putin’s arrest on charges related to the alleged unlawful deportation of children from Ukraine to Russia. As an ICC signatory, South Africa would be obliged to arrest Putin. The local currency has been on a crash course since the US accusation that Russia received arms and ammunition in South Africa early in May.SA’s geopolitical choices, and particularly the revealed strength of its relationship with Russia, has seen the rand collapse and substantial foreign selling of SA’s financial assets as Western financial market players are punish SA for its deteriorated risk environment, including its perceived significant allegiances to Russia.
Bishop says current lower levels of load shedding have also bolstered the rand, along with the news that electricity minister Kgosientsho Ramokgopa is seeking"a special dispensation" for Eskom to cut out middleman activity and procure directly from original equipment manufacturers. The rapid progress made by Ramokgopa has inspired markets, although risks remain, and the state needs to take care not to show another escalation in allegiance to Russia.
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