The rand is softer as Tito Mboweni relief rally fades a little
The rand is slightly down against major global currencies, but still firmer to the dollar than its worst level on Tuesday
The rand was slightly softer against major global currencies on Wednesday afternoon, but has retained most of the gains it made following the appointment of Tito Mboweni as the new finance minister.
The local currency jumped 40c against the dollar on Tuesday after Mboweni’s appointment, with many analysts citing the positive market reaction as a sign of confidence the government will push for fiscal restraint and improved governance.
At 3pm on Wednesday, the rand was at R14.6074 to the dollar from R14.5598, at R16.8027 to the euro from R16.7354, and at R19.2272 to the pound from R19.1397. The euro was at $1.1503 from $1.1493.
The benchmark R186 government bond was bid at an unchanged 9.23%.
Focus has shifted to international factors, notably the recent downgrade of global economic growth forecasts by the International Monetary Fund (IMF) on Tuesday. The IMF lowered its forecast to 3.7% in 2019 from 3.9%, citing the economic effects of the ongoing global trade war.
While Mboweni’s appointment was rand-positive, it would not have a lasting impact on the rand’s fortunes, said FXTM head of global currency strategy Jameel Ahmad.
“I think the news that the IMF has downgraded global growth forecasts this week for the first time since July 2016, with trade uncertainties and stress in emerging markets representing two of the primary factors behind the downgrade, sums up that the … economy remains challenged by various … external uncertainties,” he said.
Major data releases are few and far between this week, with local focus on the latest assessment of SA’s creditworthiness from Moody’s, expected on Friday.
Mboweni’s appointment is not likely to sway Moody’s assessment, said Citadel chief investment officer George Herman; instead, focus is likely to be on the details within the medium-term budget policy statement later in October.