Currency Performance Report: September 2024
Global indices experienced positive returns during September, as local markets also continued to grow. The MSCI All-Country World Equity Index was up 1.83% and the Nasdaq Composite Index was up 2.74%. Similarly, the Dow Jones Industrial Average was up 1.96% while the S&P 500 Index increased by 2.14%.
Locally, the FTSE/JSE Shareholder Weighted All-Share Index closed 4.04% higher.
Table 1: Currency returns vs US dollar
| Currency Performance (USD Base) | 1 Month | Year to Date | 1 Year | 3 Years | 5 Years | 10 Years |
|---|---|---|---|---|---|---|
| Developed Markets | ||||||
| Australian dollar | 2.19% | 1.49% | 7.42% | -1.47% | 0.48% | -2.32% |
| Euro | 0.79% | 0.88% | 5.30% | -1.31% | 0.43% | -1.25% |
| British pound | 1.93% | 5.08% | 9.66% | -0.24% | 1.71% | -1.90% |
| Japanese yen | 1.77% | -1.78% | 3.99% | -8.16% | -5.53% | -2.66% |
| Norwegian krone | 0.48% | -3.88% | 1.32% | -6.04% | -2.91% | -4.83% |
| Swiss franc | 0.51% | -0.47% | 8.21% | 3.28% | 3.37% | 1.23% |
| Emerging Markets | ||||||
| Argentine peso | -1.78% | -16.53% | -63.86% | -53.29% | -43.13% | -37.77% |
| Brazilian real | 2.98% | -10.94% | -7.64% | -0.03% | -5.27% | -7.70% |
| Chinese yuan | 1.03% | 1.14% | 4.04% | -2.80% | 0.37% | -1.33% |
| Mexican peso | 0.16% | -13.84% | -11.59% | 1.59% | 0.06% | -3.75% |
| Russian ruble | -2.53% | -2.84% | 5.34% | -7.86% | -6.95% | -8.19% |
| Turkish lira | -0.26% | -13.71% | -19.77% | -36.16% | -30.23% | -23.72% |
| South African rand | 3.27% | 5.94% | 9.61% | -4.38% | -2.58% | -4.16% |
Cumulative returns are shown for periods less than one year. Returns for periods greater than one year have been annualised.
Source: Sanlam Investments
Developed market currency performance
Norwegian krone
The Norges Bank has indicated that it will likely keep rates steady at 4.50% while inflation remains a concern alongside currency issues. Analysts predict a potential 25 basis point rate cut in December; however, a weak krone could hinder the easing effort. The hawkish stance could help stabilise the currency and address ongoing inflation concerns.
Australian dollar
The Australian dollar strengthened against the US dollar, supported by unexpectedly strong retail sales data in August, which boosted market sentiment and reduced the likelihood of an early rate cut by the Reserve Bank of Australia (RBA). Markets now see a rate cut in November as unlikely, while the probability of a December cut remains.
US dollar
The US dollar Index was down 0.92% in September. Federal Reserve Chair Jerome Powell suggested that future rate cuts would likely be smaller. He clarified that the recent 50 basis point cut does not indicate that similar changes are forthcoming. As a result, market expectations for another 50 basis point rate cut in November have decreased, with a 25 basis point reduction now more likely. US Treasury yields rose sharply after the September jobs report revealed the largest employment increase in six months, along with a lower unemployment rate and higher wages, highlighting the resilience of the labour market.
Emerging market currency performance
Russian ruble
In September, the Bank of Russia raised its key interest rate by 100 basis points to 19% and indicated another possible increase in October. Policymakers also adjusted their inflation forecast upward to 6.5%-7% for the year, with current inflation at 9.1%. The inflation surge is primarily driven by economic pressures from increased government military spending, which has raised wages and strained the economy’s ability to supply goods and services. Central Bank Governor Elvira Nabiullina recently warned of stagflation risks, given the persistent inflation and slowing growth.
South African rand
The rand has strengthened notably, continuing gains against the dollar as inflation eased to 4.4% in August. The South African Reserve Bank (SARB) reduced interest rates by 25 basis points to 8% last month, following a 50 basis-point cut by the US’ Federal Reserve, which signalled the start of a rate-cutting cycle. The SARB’s model suggests that further rate cuts of up to 100 basis points can be expected before the cutting cycle ends. Economic growth is forecast to strengthen in the last two quarters of 2024, supported by positive political sentiment, Eskom’s suspension of power blackouts and increased consumer spending driven by the government’s “two-pot” pension reform.
Outlook
Jerome Powell’s comments, along with the strength of the US labour market, have led to expectations that the Federal Reserve will opt for a 25 basis point rate cut at the November meeting, rather than 50 basis points.
Economists anticipate a 25 basis point rate cut at the SARB’s final monetary policy meeting in November. According to the SARB governor, projections suggest that rates will approach a neutral level next year, settling just above 7%, which implies an additional 75 to 100 basis points in rate cuts ahead.
Share On:
Comments are closed.