The Rand strengthened considerably in the last week, moving from R11.32 to the pound in the beginning of the week to R11.07 today.

Although the rand came under pressure with multiple strikes throughout the country, the currency remained resilient - gaining on all major currencies.

The Public service strike is in its 17th day and still going strong after the Unions rejected the government’s latest offer of 7.5% wage increase and R800 housing allowance. The members are still demanding an 8.6% salary increase witha R1000 monthly housing allowance. 

Increasing salaries at such a rate for the second year in a row could cause problems. Tony Twine, director of Econometrix, believes that if the Government continues to increase salaries by a higher percentage to where they try to keep the inflation rate, it can cause problems to South Africa's economic growth over the next five years.

Another strike arose this week when fuel station workers who are members of the Numsa Union decided to go on strike demanding a 20% wage increase with a guaranteed 40-hourweek.

However,Sacci pointed out that business went on, "Notwithstanding the wide spread protest action, business continues to operate and the 'job still gets done' which provides strong evidence of the resilience of the South African economy to cope with adversity."

Even though the strikes raises concern and it was expected that it would put a lot of pressure on the Rand, new figures from the U.S.strengthened the Rand to a new 2.5 year high, reaching up to 7.1527 to the dollar today. “Charts suggest further strength forthe rand that has traded below its 200-day moving averages for more than two weeks.” News24 reported.

::Note: The above exchange rates are based on "interbank" rates. 

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The Australian Dollar was firm this week with the release of favourable US housing and jobless claims data. This news eased investors’  fears of a second coming in the looming recession. With investor confidence high, faith was restored in the Aussie Dollar trading at a rate of 1.69 to the British pound late Thursday afternoon.

Further aiding to the Aussies strength against the British Pound was the International Monetary Funds (IMF) announcement that they had concerns regarding the United Kingdoms future debt situation. They stated that the UK debt to GBP ratio could rise to 90.6 percent in 2015.

With reinstated investor confidence the Aussie is back on a strengthening path. Because the Aussie is a carry trade currency, when investor sentiment is high and they have a high tolerance to risk there will be strong buying pressure on the Australian currency thus causing it to stand firmer against all major currencies.

John Kiriakopoulos,the head of foreign exchange strategy in Sydneyat National Australian Bank Ltd, said “all eyes will on tonight’s US payroll report, which serves as a bellwether in the health of the economy and usually produces a fair degree of currency volatility”.

Expectations regarding the Australian reserve banks decision regarding the interest rate have been revised. Most economists are now expecting that the Reserve bank will hold rates steady at 4.5 percent on 7 September 2010.

The week ahead isloaded with uncertainty and speculation about where the currency is heading. If the current trend continues we should see further dollar strength continuing into next week.

AUD/ GBP:              0.593

AUD / EUR               0.711

AUD / USD:             0.917

AUD / JPY:              77.379

Exchange rates as of 09:48, 06September 2010

Composed by Paul Gerber

:: Note: The above exchange rates are based on"interbank" rates.
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The New Zealand Dollar began the weak trading at 2.1858 against the British pound and ended at 2.1562. Against the US Dollar, the kiwi remained stable trading at an average of 1.4116 for the week ending 3 September 2010.

After the collapse of South Canterbury Finance earlier this week, the New Zealand dollar seems to have put this behind it and had climbed higher by Wednesday.

Some ground was also gained against the Australian dollar due to a report releasedby the Australian government advising the decline in trade surplus over the last quarter. Mike Jones a market strategist at BNZ noted that “the mainfeature of today’s (Thursday) session was some quite strong buying of the NZ dollar against the Australian dollar.”

Data surrounding job claims and housing was released by the US building confidence in the market and another contributing factor to the strengthening of the kiwi.

The New Zealand dollar has continued to climb throughout the weak ending on a stronger note than the beginning.

Saturday, unfortunately, saw an earthquake hit Canterbury measuring 7.1 on the Richter scale. There have been reports of nearly 100 aftershocks, the biggest of which had a magnitude of 5.5.

“It is still possible that we'll have a magnitude 6 in the next week, and people ought to be aware ofthat, particularly if they are around structures which are already damaged," said the manager of the geo-hazards monitoring section which runs the GeoNet at GNS Science, Ken Gledhill.

Composed by Kerry Howieson

:: Note: The above exchange rates are based on"interbank" rates.
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