Rand firms in mild global risk reversal
Emerging-market currencies have had a slight reprieve on Tuesday as no new threats on tariffs have been made in the US-China trade war
The rand was stronger on Tuesday afternoon in a third day of gains amid a mild reversal in global risk sentiment.
Emerging-market currencies have had a slight reprieve as no new threats on tariffs have been made in the US-China trade war. Also, looser monetary policy in major economies has been mooted amid mounting global growth concerns, lifting sentiment.
“We are seeing a moderate risk reversal as risk appetite improves and US [stock] markets are approaching high levels again. The risk reversal comes from the fact that we have not seen anything new, as far as the US-China trade war is concerned,” senior market analyst at Oanda Craig Erlam said.
“Talks of stimulus efforts could be aiding the push in emerging-market currencies but I do not think its responsible for the broader risk appetite that we have seen,” Erlam said.
Both rates cuts and stimulus in developed markets benefit SA, as when there is more money in the global system, the hunt for higher returns becomes more earnest, with investors prepared to take on a little more risk for those better returns.
The European Central Bank is expected to announce its decision on monetary policy on Thursday.
At 2.50pm, the rand had firmed 0.56% to R14.6799/$, 0.66% to R16.2056/€ and 0.49% to R18.1488/£. The euro was flat at $1.1039.
Gold was down 0.2% to $1,495,88/oz and platinum 0.26% to $941.88. Brent crude added 0.8% to $63.18 a barrel.
Manufacturing production contracted 1.1% in July from a downwardly revised 3.6% in June (originally 3.2%), data from Statistics SA showed on Tuesday. The consensus was for a contraction of 1.5%, according to a Bloomberg poll.