The rand may now come under more pressure after yet another spike in political risk in Europe, where banks have in recent years been recovering from financial crises. This means investors will probably be looking even more critically at emerging market equities in coming months, with the JSE already under pressure from a rising dollar and expectations of global synchronised monetary policy tightening. On Wednesday, the JSE failed to capitalise on a global relief rally, despite the rand bouncing back from a sharp sell-off on Tuesday, when risk aversion swept through the market due to uncertainty in the eurozone. Fears have grown that Italy will opt to ditch the euro after attempts to form a coalition government in that country failed on Monday, once again putting the fragility of the bloc’s currency in focus.
The Italian issue had been a contributing factor in a rally in the US dollar and a rise in US treasury yields over the past month, leading to increased appeal for develope...
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