The rand targeted a move back above R15.00 against the dollar on Thursday as the simmering US-China trade war continued to eat away at sentiment around emerging markets.
The rand had strengthened its position this week, following a brief move above R15.00 as a result of ANC infighting around its position on the Reserve Bank.
By Wednesday, the currency had shown signs of a recovery, strengthening to around R14.65, but in morning trade on Thursday, it had surrendered those gains, dropping to R14.90 (-1.8%).
According to Bianca Botes, treasury partner at Peregrine Treasury Solutions, the fresh wave of pain for the rand can largely be laid at the feet of US president Donald Trump.
“Just when you think that emerging markets finally have a chance to regain some momentum, President Trump moves in.
“Not even an ‘extremely beautiful letter’ from Chinese president Xi could deter Trump from once again fuelling the trade war jitters, categorically stating that unless China agrees to a few contentious matters, a trade agreement will not be reached,” she said.
“Currency markets largely hinge on the US president’s Twitter account and once again we are looking towards China and the US to ease market fears.”
However, local factors are also playing a role, as mixed data comes out of South Africa’s economy, while local politics continued to flare up.
Public Protector Busisiwe Mkhwebane called for president Cyril Ramaphosa to respond to findings from an investigation into a Bosasa bribery scandal.
Ramaphosa has until June 21 to respond to the preliminary findings of the investigation, which will be finalised after he does so. The president has applied to cross reference the people who brought the complaints against him, including DA leader Mmusi Maimane.
Economists said they expect uncertainty about the impact of Mkhwebane’s investigation on Ramaphosa’s reform drive to continue to weigh on the rand for the rest of the week.
According to Botes, the local environment is a mix – with retail and manufacturing data point to a recovery in the local economy in Q2 2019, however calls for the SARB to rate cuts are intensifying, “which is also not doing the rand any favours”.
“South Africa is set to release gold and mining production data today, while the EU will release industrial production stats. The US jobless claims will weigh in on markets this afternoon.”
In early morning trade, the rand was trading at the following levels against major currencies:
- ZAR / USD – R14.90
- ZAR / GBP – R18.90
- ZAR / EUR – R16.84