Daily Commentary - 29 June 2017

Contact Merchant West Capital Markets on: (+27 11) 305-9500 or treasury@merchantwest.co.za

- USD / ZAR 12.9630 - EUR / ZAR 14.8116 - GBP / ZAR 16.8286 -

Economic Events:

29-June: EZ Economic Confidence  - SA PPI - US GDP; Jobless Claims

30-June: UK GDP - SA Trade Balance -US University of Michigan Sentiment

Market Commentary:

By late yesterday afternoon the rand had gained 0.36 percent to 12.9725 per dollar, dipping below the psychological 13.00 level as investors sold the greenback and bought emerging currencies. Gold , seen as a safer alternative investment during times of political and financial uncertainty, was up 0.3 percent, this helped lift the rand as South Africa is one of the world's top exporters of the commodity. The rand has see-sawed this week amid policy uncertainty ahead of the ruling African National Congress's policy conference at the weekend, erasing most of the gains driven by an intense worldwide hunt for high-yield assets. Bonds were weaker, with yields at a one-month highs. The yield on the benchmark 2026 government issue rose 4 basis points to 8.66 percent.

South Africa's rand and mining stocks strengthened yesterday  as the dollar plunged on U.S. stimulus uncertainty, although AngloGold Ashanti fell more than 4 percent after saying it may retrench 8,500 workers. Lonmin and Royal Bafokeng Platinum climbed 3.81 percent and 2.59 percent respectively as platinum rose 0.49 percent at $922.70."We've seen the dollar for the greater part of the day coming off against most major currencies and that has given some of these resource stocks some relief," Paul Chakaduka, a trader at Global Trader said.

On the domestic front:

AngloGold Ashanti is considering laying off 8,500 workers, which is approximately 30 percent of its workforce, Africa's biggest gold miner said yesterday, as it looks to restructure its South African mines. “It is critical that we act to protect the long-term sustainability of this business and the majority of our workforce," Chief Executive Officer Srinivasan Venkatakrishnan, said in a statement. It said its South African gold mining operations had experienced "heavy, and ultimately unsustainable, losses". The company, which employs 28,000 people, said the potential lay-offs were part of its efforts to improve production and the cost base of its South African business. In May, AngloGold reported a 16 percent drop in first-quarter profit following a decline in South African production and said it was reviewing its operations to restore margins and ensure their recovery.

On the International front:

The dollar shuddered to its lows for the year this morning as a drumbeat of hawkish comments from major central banks signalled the era of easy money might be coming to an end for more than just the United States. Support for the dollar eroded as investors realised the U.S. Federal Reserve might not be the only game in town when it came to higher interest rates. In Britain, Bank of England Governor Mark Carney surprised many by conceding a hike was likely to be needed as the economy came closer to running at full capacity. That followed comments earlier in the week from European Central Bank President Mario Draghi that stimulus might need to be toned down so it does not become more accommodative as the economy recovers. "If we want to know what the ECB is planning, we will choose a carefully scripted Draghi speech over anonymous sources every time," said Westpac currency strategist Sean Callow. This morning the single currency had already pressed on to $1.1405 having climbed three percent in as many days.

Our range on the day: 12.80-13.10