JSE faces weaker Asian markets on Friday, but rand strengthens through R14.50/$

The JSE must contend with weaker Asian markets on Friday, but the rand was extending gains, trading below R14.50/$ for the first time since October in the wake of hawkish Reserve Bank commentary.

The Bank delivered a third consecutive 25 basis point hike on Thursday as expected, but two members of the committee voted for a 50 basis point increase, while SA’s growth expectations have also been given a bump.

The rand rallied after the decision, gaining 1.57% on Thursday, while in morning trade on Friday it had firmed 0.15% to R14.48/$.

The debate has shifted from whether the Bank will pause in the coming meetings, and is now over whether there will be enough reason to hike by 50bp rather than 25bp at forthcoming meetings, said Matrix Fund Managers economist and macro strategist Carmen Nel in a note.

Sharp rand weakness has historically been the trigger for larger increments, said Nel, and accelerated US Federal Reserve tightening, consumer inflation breaching 6%, and inflation expectations climbing further could culminate in a 50bp hike by the Bank at the May or, more likely, the July MPC meetings.

Key Asian markets were struggling on Friday morning, with sentiment remaining volatile as investors consider the potential impact of the war in Ukraine on global growth and inflation, as well as strong US employment data on Thursday.

In morning trade the Hang Seng was down 1.70% and the Shanghai Composite 0.47%, while Japan’s Nikkei had lost 0.3%.

Tencent, which can give direction to the JSE through Naspers and Prosus, had given back 1.64%.

Gold was up 0.14% to $1,961.21/oz while platinum had risen 0.58% to $1,030. Brent crude was up 0.52% at $118.78 a barrel.

The local economic and corporate calendar is bare on Friday, when the JSE will need to gain about 0.67% to reach last week Friday’s close.

gernetzkyk@businesslive.co.za