Rand a little firmer as market eyes Cyril Ramaphosa’s cabinet
The US-China trade war and local developments should dominate this week, and the local currency’s volatility could pick up in coming days
The rand was a little firmer on Monday morning, although lacking in clear direction, with a series of risk events offering the prospect of volatility in the week ahead.
There is a little on the calendar on Monday, but the US Federal Reserve will release minutes from its last meeting on Wednesday, while locally, the Reserve Bank will pronounce on monetary policy on Thursday.
Global focus remains on the US-China trade war, amid concerns that the conflict will escalate further before easing.
The trade conflict had put pressure on the Chinese yuan, spilling over into emerging markets more generally, and breaking the rand out of the comfortable R14.20/$-R14.30/$ range it was in last week, said TreasuryOne senior currency dealer Andre Botha. Further volatility should be expected, and a sustained break above R14.50/$ would point to further weakness.
Emerging markets were getting a little boost on Monday, however, by political developments in India. The Indian rupee surged against the dollar after exit polls showed incumbent Prime Minister Narendra Modi was on track to win a second term.
At 9.30am the rand was 0.35% firmer at R14.3573/$, 0.37% stronger at R16.0209/€ and up 0.38% to R18.2848/£. The euro was flat at $1.1158.
Some local focus remains on President Cyril Ramaphosa’s new cabinet, which is expected at the weekend. There could be headlines regarding who is in and who is out, which may be scrutinised for clues as to Ramaphosa’s ability to push through anti-corruption and pro-growth policies.
Some of these policies may find political resistance from within the ANC.
Eskom’s debt mountain may also generate headlines, with reports on Monday suggesting the government was still considering transferring some of it directly onto the state’s balance sheet.
Should Eskom’s financial position deteriorate further, this would put pressure on the fiscus, and would be viewed negatively by ratings agencies, including Moody’s Investors Service.