Local and global catalysts supporting rand

After significant weakening of the rand over the previous two weeks, strength is being renewed on the back of both domestic and international catalysts.

A surprise revision of local trade balance data for January through to September 2013 witnesses a reduced deficit in the region of 50% from R126.4bn to R64.5bn helping the rand gain traction. The much improved figure was a result of the inclusion of trade surpluses from peripheral countries surrounding South Africa as well as land locked Lesotho.

Riskier assets and emerging market currencies were also given a boost following Janet Yellens comments around an improved yet fragile US economy still in need of aid, with the suggestion of delayed tapering supporting risk-on sentiment once more.

Our Top40 index is attempting to close the week on a strong note after the recent decline which was in the region of 4% off all-time highs. When markets correct, nervousness is induced and doomsday profits are quick to emerge. However, corrections in markets are necessary for longer-term gains and it does appear that the longer-term uptrend is resuming at present.

The end of the week witnesses broad-based gains in equity markets which has been led by the previously underperforming general retail sector.

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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