Local currency more at risk from external factors than those affecting SA
11 November 2018 - 17:33
byKarl Gernetzky and Andries Mahlangu
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Optimism that the rand was poised for further strength following the US midterm elections came to an untimely end last week, with the rand losing 30c to the dollar following a five-day winning streak.
The local currency is expected to continue to be at the mercy of global markets, but there is growing hope that stability in the rand and easing inflationary pressures could lead to the Reserve Bank cutting interest rates in coming months.
The rand reached R13.88 to the dollar last week, as risk appetite surged after the US elections ended with the Democrats capturing the House of Representatives from the Republicans.
Although the rand headed into the weekend on a defensive footing, that had not detracted from longer-term optimism that the local currency was making a recovery, said analysts at Mercato Financial Services.
ETM Analytics market analyst Halen Bothma said earlier in the week that while there was scope for the rand to recover from oversold levels, the outlook was still murky given the fickle global environment stemming from the China-US trade dispute and the extent to which it could affect global growth and sentiment.
Analysts expect the rand could end the year at about R13.70 to the dollar, but much depends on movements in the euro and the greenback, particularly if the euro weakens past the $1.13 level, analysts said. This could trigger a bull run for the dollar, with the rand usually tracking the euro.
The euro had held at that support level twice, but the third time could prove to be the charm, said BK Asset Management MD Boris Schlossberg. This was particularly the case should the US Federal Reserve continue to tighten monetary policy at a faster pace than the European Central Bank, he said.
Dismal local mining and manufacturing also added to pressure on the local currency, although the rand’s recent strength has again been attributed to dollar weakness.
The rand had started off November with a bang, firming almost 6%, until its slipped on Thursday night, according to Iress data.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Rand’s rally tripped up by hawkish Fed
Local currency more at risk from external factors than those affecting SA
Optimism that the rand was poised for further strength following the US midterm elections came to an untimely end last week, with the rand losing 30c to the dollar following a five-day winning streak.
The local currency is expected to continue to be at the mercy of global markets, but there is growing hope that stability in the rand and easing inflationary pressures could lead to the Reserve Bank cutting interest rates in coming months.
The rand reached R13.88 to the dollar last week, as risk appetite surged after the US elections ended with the Democrats capturing the House of Representatives from the Republicans.
Although the rand headed into the weekend on a defensive footing, that had not detracted from longer-term optimism that the local currency was making a recovery, said analysts at Mercato Financial Services.
ETM Analytics market analyst Halen Bothma said earlier in the week that while there was scope for the rand to recover from oversold levels, the outlook was still murky given the fickle global environment stemming from the China-US trade dispute and the extent to which it could affect global growth and sentiment.
Analysts expect the rand could end the year at about R13.70 to the dollar, but much depends on movements in the euro and the greenback, particularly if the euro weakens past the $1.13 level, analysts said. This could trigger a bull run for the dollar, with the rand usually tracking the euro.
The euro had held at that support level twice, but the third time could prove to be the charm, said BK Asset Management MD Boris Schlossberg. This was particularly the case should the US Federal Reserve continue to tighten monetary policy at a faster pace than the European Central Bank, he said.
Dismal local mining and manufacturing also added to pressure on the local currency, although the rand’s recent strength has again been attributed to dollar weakness.
The rand had started off November with a bang, firming almost 6%, until its slipped on Thursday night, according to Iress data.
On Sunday the rand was at R14.33 to the dollar.
Rand falls 1% as dollar rebounds on hawkish Fed statement
‘Tweeto’ Mboweni rattles the rand
JSE slumps 1.5% as Naspers plunges and rand loses 20c
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.