Rand stays on recovery path in line with global markets
The rand was reasonably strong on Tuesday morning, catching the spoils of so-called risk-on trade.
Foreigners were net buyers of local bonds the value of R1.42bn on Monday, boosting the value of the rand, which plays a key role in the outlook for inflation.
With the dust appearing to settle on global markets, investors are gradually coming back into emerging markets, which tend to suffer collateral damage as a collective during bouts of risk-off trade.
Recently, the US-China trade row was the catalyst that undermined global sentiment, contributing to bond and equity outflows from emerging markets and pushing the rand to nearly R14/$ for the first since November before coming back.
The rand’s recovery also benefited from a shaky dollar, after a mixed US nonfarm payrolls report led some to believe that US Federal Reserve would stick to its gradualist approach in raising interest rates.
A relatively stronger rand would also help reduce the probability of another fuel hike. A weaker rand and higher international prices over the past few months have helped push petrol to record highs, prompting the government’s announcement last week that it was looking into ways to help relieve pressure on consumers.
SA is a net importer of fuel, which makes it susceptible to the vagaries of the oil market — a situation not made easier by the volatility in the rand-dollar exchange rate.
Consumers are feeling the pinch through higher fuel prices, as well as other levies such as increased value-added tax (VAT).
Markets also kept a close watch on UK politics, after the resignation of two high-profile politicians involved in the Brexit process.
The uncertainty about Brexit has had a marked effect on the pound, as well as several JSE-listed stocks with operations in the UK.
At 10.06am, the rand was at R13.3770 to the dollar from R13.4104. It was at R15.7092 to the euro from R15.7603, and R17.7672 to the pound from R17.7863 The euro was at $1.1743 from $1.1750.