South Africa’s rand hit a 3-week high against the dollar early on Monday morning, following a surge in emerging markets currencies as risks over a shock in the French elections subsided.
The Rand opened at 1.14% firmer from its New York close on Friday to R12.97 to the dollar – its strongest levels in three weeks and its best levels since the day before President Jacob Zuma’s controversial cabinet reshuffle and the subsequent ratings downgrades.
“Over the weekend the French elections provided some comfort to the markets with the (successful) moderate candidate providing support for the euro, and in turn to emerging markets,” Nedbank Capital analysts said speaking to Reuters.
“The price action in the rand would suggest that at the current time, global factors outweigh the ongoing local political wrangling and recent events.”
The rand broke through the psychological barrier of R13 to the dollar for the first time in three years on 16 February, leading to hopes of a possible rate cut and further strengthening.
However analysts are less hopeful this week, amid concerns of further downgrades and more political uncertainty.
Speaking to IOL, Chief Economist at Rebalance Fund Managers, Chris Harmse, noted a disturbing negative correlation between the rand and dollar exchange rate and share prices, as the all share index lost 2.55% as rand hedging stocks were sold off.
Commodity prices also tumbled this past week, pushing the resources 20 index down by 4.8%.