The rand is targeting its biggest monthly gain against the dollar in 2018, and also its best November in 30 years, according to Bloomberg.
The gain of 8.1% this month is surpassed only by the 9.1% advance in November 1988.
The rand has weakened in November in seven of the last 10 years, according to data compiled by Bloomberg. But it climbed to a four-month high against the greenback on Thursday after Federal Reserve Chair Jerome Powell hinted at a softer policy stance, sending the dollar weaker and US 10-year yields below 3% for the first time since September.
South Africa’s currency gained against the majors in trade on Thursday, and continued to hold firm in early trade on Friday:
- Dollar/Rand: R13.66 (-0.05%)
- Pound/Rand: R17.45 (0.03%)
- Euro/Rand: R15.56 (0.04%)
Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions said that with the month rapidly drawing to an end, politics seems to show no sign of slowing its impact on currencies.
“This week saw the focus shift to the G7 summit and the potential for constructive dialogue between the US and China. However, US President Donald Trump is showing no sign of interest in any discussion that might bring an end to the trade war, even throwing a subtle hint about the UK into the mix.”
On the local front, Botes noted that business confidence fell once again, this time to levels last seen during the credit rating downgrades in 2017, “a concerning event taking into account the high unemployment and low GDP growth in South Africa”.
“Domestic business seems to have very little faith in the ability of government to turn the ship around. Local PPI also accelerated from 6.3% to 6.9% year-on-year in October 2019.”
The rand kicked the week off slowly but, in a welcome move, US Federal Reserve Chairman Jerome Powell indicated in his speech on Wednesday that the US interest rate hiking cycle could soon be coming to an end.
The local unit, along with other emerging market currencies, is taking full advantage of the tumbling dollar, sustaining a break below $13.80/$, the analyst said.
The energy department is expected to announce a big drop in the fuel price for December, with the Automobile Association predicting a drop in the petrol price of R1.85 as a result of lower oil prices and a stronger rand.
“We will be keeping an eye on the local trade balance this afternoon, while next week will bring quite a bit of data as Stats SA releases manufacturing production and vehicle sales as well as the important Q3 2019 GDP figures. Whether SA remains in a recession or has pulled out of it will be closely watched.
“The rand is basking in the afterglow of the Federal Reserve comments, currently trading at R13.68,” Botes said.