The rand was weaker against major global currencies on Wednesday afternoon, down 0.38% against the dollar for the week, with investor concerns over SA's economic prospects continuing to weigh on the local currency.

The rand was on track for its fifth consecutive session of losses on Wednesday, as continuing problems at the power utility Eskom and perceptions of political fragmentation continue to spook investors, analysts said. There are concerns that SA is headed for further credit-ratings downgrades.

“We think that the market is pricing in a 67% probability of a downgrade. It is reasonable to expect that the fear factor will push the rand weaker as we head into finance minister Tito Mboweni’s budget speech at the end of February and the rating review a month later,” Anchor Capital chief investment officer Nolan Wapenaar said.

“Against this backdrop, the SA Reserve Bank’s monetary policy committee (MPC) is meeting this week. However, in our view, the MPC will keep interest rates on hold given the domestic risks,”  Wapenaar said. The Bank is expected to make its announcement on Thursday.

At 12.07pm the rand had weakened 0.13% to R14.4238/$ and 0.17% to R16.0472/€. The local currency was little changed at R18.7424/£. The euro was almost unchanged at $1.1126. 

The global environment remains somewhat supportive, with expectations running high that the first phase of the trade deal between China and US will be signed later on Wednesday.

The prospect that a partial trade deal will be formalised in January has boosted global markets recently, but US officials said on Tuesday that tariffs against China may not be lifted until a more comprehensive deal is reached.

The first phase of the trade deal aims to vastly increase Chinese purchases of US manufactured products, agricultural goods, energy and services.

The first phase agreement caps 18 months of tariff conflict between the world’s two largest economies that has hit hundreds of billions of dollars in goods, roiling financial markets, uprooting supply chains and slowing global growth, reported Reuters.

A deal between China and the US could boost the rand, and other emerging market currencies, as it bodes well for global growth prospects. This could raise demand for SA exports, such as commodities.

Precious metals — a key source of SA's foreign exchange — were higher on Wednesday, with the price of platinum rising 1.69% to $1,000.99/oz — an almost two-year high.

Gold was up 0.45% to $1,553.19/oz.


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