Picture: 123RF/LEON SWART
Picture: 123RF/LEON SWART

The rand was a little stronger on Tuesday morning, resembling the "buy the rumour and sell the fact" scenario.

As widely telegraphed, US President Donald Trump made good on his promise by slapping tariffs on $200bn worth of Chinese goods, upping the ante in the month-long trade dispute with China. But risk assets hardly blinked, partly because the news been has been discounted. The attention has now shifted to China for a possible retaliatory response on the tariffs.

"At the same time, we cannot forget about the long-term negative consequences of the world trade problems," said UK-based FxPro.

As for the rand, it has weakened substantially in recent months, limiting the potential for a further downside. The weaker rand environment has raised the spectre of higher inflation, which could persuade the Reserve Bank to raise interest rates by 25 basis points when its monetary policy comments wraps up its meeting on Thursday, according to some economists.

Higher interest tends to attract foreign capital.

South African bonds were relatively steady in the mid-morning session, but, like the rand, have been under enormous pressure in recent weeks. The yield on the benchmark R186 paper was at 9.245%, from 9.250% at its close on Monday.

"Some calm and stability has returned following the intense sell-off of emerging market assets over the past few weeks," Old Mutual Multi-Managers analysts Dave Mohr and Izak Odendaal said in an e-mailed note to clients.

"Perhaps the 10-year anniversary of the Lehman Brothers collapse reminded investors what a real crisis looks like. In contrast, the recent troubles of emerging markets are very manageable — although, clearly tough times lie ahead for Argentina and Turkey, in particular."

At 10.50am, the rand was at R14.9159 to the dollar, from R14.9291. It was at R17.4295 to the euro from R17.4436, and at R19.6018 to the pound from R19.6476. The euro was at $1.1685 from $1.1684.