Picture: REUTERS
Picture: REUTERS

The rand capped its third consecutive week of gains on Friday as the prospect of higher local interest rates countered rising risk aversion ahead of the Group of 20 (G20) meeting.

A week after the Reserve Bank raised interest rates for the first time in more than two years, governor Lesetja Kganyago said that while inflation had slowed in the short term, it was on an upward trajectory in the long term, indicating that the Bank was likely to raise rates further in 2019.

The rand, which recorded its best November in 30 years, also found support from Federal Reserve chair Jerome Powell’s surprisingly dovish speech on Wednesday, when he said rates were “just below neutral” — implying the Fed may slow the rate of monetary-policy tightening in coming months.

On Friday it pared some of those gains before the start of the G20 meeting in Buenos Aires, Argentina.

US President Donald Trump is set to face his Chinese counterpart Xi Jinping at a Saturday dinner meeting, where trade between the two countries is bound to dominate talks.

The war of words between the pair has caused volatility in markets the world over in the past few months, after Trump raised the cost of US companies bringing goods from China by increasing tariffs on those imports. The tit-for-tat battle is threatening global growth, heightening volatility in most major markets.

Late on Friday the rand was a little weaker, cutting its gain to 7.69% against the dollar in November. It is, however, still 9.91% weaker in 2018.

At 5.18pm, the rand was down 0.71% to R13.7617 to the dollar, 0.19% to the euro at R15.6031 and 0.35% to the pound at R17.5341. The euro was flat at $1.1338.

The JSE all share lost more than 2% on Friday with banks and financials hardest hit, while Naspers lost 2.02% to R2,763 after releasing interim results earlier in the day. The share initially rose 1% immediately following the release of the results, but later succumbed to the general downbeat mood on the bourse.

Naspers grew its core headline earnings in the six months to end-September by 39%, thanks to its interest in China’s Tencent, and MultiChoice.

The banking index fell 3.26%, financials 2.25% and industrials 2.02%. The all share was, however, flat on the week, but ended November down 3.29%. It has lost nearly 15% in 2018.

The weaker rand put pressure on local bonds on Friday, with the benchmark R186 government bond weakening to 8.95% from Thursday’s 8.89%.

While mixed messages have been the order of the day from the White House this week, markets are expected to settle following Trump and Xi’s meeting.

Tuesday sees the release of SA’s third-quarter GDP numbers. The country is expected to have broken out of the recession it suffered in the first half of the year, with a Bloomberg consensus forecasting third-quarter growth of 1.9%

lindera@businesslive.co.za