Currency Performance Report: August 2024
Global indices experienced positive returns during August, while local markets continued their previous month’s growth. In August, the MSCI All-Country World Equity Index was up 1.76% and the Nasdaq Composite Index was up 2.64%. Similarly, the Dow Jones Industrial Average was up 2.03% while the S&P 500 Index increased by 2.43%.
Locally, the FTSE/JSE Shareholder Weighted All-Share Index closed 1.38% 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 | 4.25% | -0.69% | 4.32% | -2.58% | 0.08% | -3.17% |
| Euro | 2.43% | 0.09% | 1.87% | -2.20% | 0.10% | -1.72% |
| British pound | 3.10% | 3.10% | 3.54% | -1.56% | 1.55% | -2.32% |
| Japanese yen | 2.41% | -3.49% | -0.43% | -9.03% | -6.17% | -3.34% |
| Norwegian krone | 3.46% | -4.34% | 0.35% | -6.38% | -2.95% | -5.22% |
| Swiss franc | 2.79% | -0.98% | 3.92% | 2.49% | 3.10% | 0.78% |
| Emerging Markets | ||||||
| Argentine peso | -2.16% | -15.01% | -63.21% | -53.16% | -42.56% | -37.68% |
| Brazilian real | 0.85% | -13.51% | -11.69% | -2.82% | -5.87% | -8.79% |
| Chinese yuan | 2.18% | 0.11% | 2.37% | -3.05% | 0.19% | -1.42% |
| Mexican peso | -4.60% | -13.98% | -13.61% | 0.59% | 0.36% | -4.01% |
| Russian ruble | -5.68% | -0.32% | 5.93% | -6.87% | -5.93% | -8.55% |
| Turkish lira | -2.85% | -13.48% | -21.66% | -37.53% | -29.75% | -24.09% |
| South African rand | 2.59% | 2.58% | 5.89% | -6.62% | -3.15% | -5.01% |
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
Japanese yen
In July 2024, Japan’s annual inflation rate was 2.8%, marking the third consecutive month at this level, the highest since February 2024. Officials from the Bank of Japan (BOJ) have signalled a willingness to increase interest rates if economic and price forecasts are met. Market speculation suggests that the BOJ might implement another rate hike in December.
Australian dollar
Markets are eagerly awaiting indications from Reserve Bank of Australia (RBA) Governor Michelle Bullock. Bullock recently stated that while inflation seems to be easing, it is still “premature” to consider lowering interest rates. Furthermore, the minutes from the RBA’s last meeting indicated that the current restrictive monetary policy may remain in place for some time.
US dollar
The US dollar Index was down 2.27% in August. Investors reduced expectations for significant Federal Reserve rate cuts following the release of the latest inflation data. The data showed that US core PCE (Personal Consumption Expenditure) prices remained steady in July, dampening hopes for a substantial 50 basis point rate cut in September. Several Federal Reserve policymakers have expressed concern about a weakening jobs market while remaining optimistic that inflation will return to the target rate.
Emerging market currency performance
Russian ruble
The Russian ruble weakened due to the ongoing geopolitical conflict, leaving investors uncertain about a potential escalation of the conflict. Meanwhile, the Central Bank of Russia (CBR) raised its benchmark interest rate by 200 basis points to 18% in July in response to increasing inflationary pressures. The CBR also indicated that further rate increases may be necessary if inflation doesn’t slow sufficiently.
South African rand
The outlook for the rand improved as investors anticipate a potential US interest rate cut by the Federal Reserve in September. The South African Reserve Bank (SARB) is also considering a reduction in rates by at least 50 basis points this year. However, SARB Governor Lesetja Kganyago tamed these expectations, emphasising that rate cuts are not the solution to South Africa’s economic challenges. He noted that issues like education, urbanisation and load shedding need to be addressed for meaningful progress. In July, consumer price growth was 4.6%, below forecasts and the lowest in three years.
Outlook
The latest US inflation data reduced expectations for a sharp Federal Reserve rate cut. The Fed now anticipates lowering rates by at least 25 basis points during each of the next three Federal Open Market Committee (FOMC) meetings for the year.
Locally, price pressures are now projected to ease below 4.5% in the fourth quarter, an improvement compared to May forecasts, which only anticipated this decline by the second quarter of 2025. Markets are predicting that the SARB will reduce rates by 25 basis points in its September meeting.
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