South Africa’s rand was unable to hold on to gains below 7.30/$ which caused investors and speculators to buy back short dollar positions. This morning we are back above 7.40/$, we should keep in mind that S.A. Reserve bank is not comfortable with the rand’s strength and will probably continue to build reserves into any rand rallies. Trading conditions are thin which will increase volatility.
The exchange rate of the Yuan is not responsible for the United States’ widening tradedeficit with China, China’s ambassador to the country said on Thursday. “Personally, I think the root cause for the fiscal deficit and the trade deficit here (in the United States) is not really the exchange rate of the (Yuan),” Zhou Wenzhong told a National Committee on United States-China Relations dinner. China has had a huge trade surplus with the United States, and is the largest foreign holder of U.S. government bonds. The U.S. trade deficit with China widened 9.2 percent in September to $22.1 billion, the highest since November 2008, according to U.S. data released last month. Zhou said that the Yuan had appreciated by some 20 percent since reform of the exchange rate began in 2005. China allowed the Yuan to rise from 2005 to 2008 before effectively repegging it to help its exporters cope with a slump in global demand. It has moved little since.