Picture: REUTERS
Picture: REUTERS

In this edition of the Business Day Spotlight, we track the progression of the rand in global currency markets.

Our host Mudiwa Gavaza is joined Nolan Wapenaar, head of fixed income at investments house Anchor Capital, and Jameel Ahmad, global head for currency strategy and market research at financial markets specialist FXTM.

Listen to the outlook: 

In the first part, Wapenaar gives a status update on the local currency. He says 2019 ended with a bull market for emerging-market currencies, which benefited the rand. This positive sentiment was driven by easing relations between Washington and Beijing, together with revelations around Brexit and the US Federal Reserve’s monetary policy. 

So far in 2020, though, global factors such as the coronavirus have had a negative effect, but local factors such as the upcoming national budget by finance minister Tito Mboweni and Moody’s credit ratings decision in March may have a big effect on the rand in the short term. 

On the whole, he says the rand may strengthen to about R14.10 against the dollar if global factors, such as the coronavirus, are contained, or remain around the R15 level if weakening sustains.

In the second part of the discussion, Ahmad joins from London to give an international view of the rand. He says the rand has not had a good start to the year, having been one of the worst performers against the greenback. Only Namibia, Swaziland, Lesotho and Brazil have had worse performing currencies against the dollar, Ahmad says.

He says the coronavirus has had the biggest negative effect on the rand. While some in the market have tried to minimise the impact of the virus on global markets, Ahmad says it has caused global investors to move away from emerging-market currencies which has fed into the growing strength of the dollar.

Ahmad highlights that there is a silver lining for SA in the gold price, which reached a seven-year high this week, trading above $1,630 an ounce. As a major gold exporter, SA may benefit from this rally, potentially offsetting some of the negative sentiment experienced so far in 2020.

Hypothetically, the local currency could breach the R16 level to the dollar if the coronavirus is not contained, says Ahmad, but that can only be ascertained over the long term. 

At the time of recording, the rand was trading at R15.09/$, R19.50/£ and R16.28/€.

For more episodes, click here.

Engage on Twitter at #BDSpotlight

Subscribe: iono.fmSpotify | Apple Podcasts | Pocket Casts | Player.fm

Business Day Spotlight is a MultimediaLIVE production

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.