Rand holds gains at five-week high as JSE set to be choppy given mixed Asian markets

The rand was relatively steady on Tuesday morning, catching its breath after racing to its highest level in about five weeks against the dollar, bringing potential relief to importers such as millers.

The SA currency had touched R15.40/$ as recently as August 20, its weakest level in five months, before staging a dramatic comeback to trade at R14.22/$.

The current bout of relative strength in the rand is mostly tied to a weaker dollar, after the US created fewer jobs than expected in August, raising concern that the highly transmissible Covid-19 Delta variant may be starting to bite.

US Federal Reserve chair Jerome Powell has said the Fed would monitor the incoming data before scaling back its multibillion dollar bond purchases programme, which has helped a great deal in nursing the world’s economy back to health.

Investec chief economist Annabel Bishop said in a note that the surging Covid-19 cases in the US and corresponding spike in deaths could potentially delay the Fed’s decision to reduce its $120bn a month bond-buying programme.

“In particular, the Fed watches financial market sentiment, and if this starts to flag and turn significantly negative, it could also add to [the Fed’s] caution in reducing QE [quantitative easing]. The third wave of deaths and cases has not yet peaked, and risks worsening substantially,” Annabel said.

Elsewhere, stock markets were mixed in Asia, after a stronger-than-expected trade balance data in China. The country is one of SA’s key trading partners and consumes vast amounts of raw materials from SA’s mining companies such as Kumba Iron Ore. China’s imports rose 33% in August relative to market expectations of 26.8%

Commodity prices were relatively lower on the day, with the gold price slipping 0.26% to $1,818.79/oz.

The JSE could go higher, boosted in part by industrial heavyweight Naspers, given that technology shares in Asia were higher. Naspers has a 29% stake in Tencent, which it holds via its global internet arm, Prosus.

mahlangua@businesslive.co.za