The ZAR traded at R16.51 to the USD last week, capping off a 13 rally against the greenback over the past year.
In the same week, the Absa Purchasing Managers Index PMI shows a manufacturing sector in deep trouble, with the index declining by 1.5 points to 40.5 in December its lowest level since the Covid shock in 2020. An index below 50 signals a contraction in economic activity. Above 50, the economy is expanding.
Theres a clear disconnected between the ZAR-USD exchange rate and weak economic fundamentals at home. Lower inventories and a decline in the employment index were the main reasons for the PMI drop.
