Rand takes a hit against the dollar
The rand weakened significantly in morning trade against a firmer dollar on Monday, thanks to an uptick in US capital market yields.
The rand lost almost 2% in mid-morning trade, to R12.26, while it also struggled against the other major currencies in the UK pound and euro.
Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions, pointed to a rally in US assets for the rand’s decline.
“Currently all emerging markets are coming under pressure, but the rand is really bearing the brunt,” Botes said. “This pressure is expected to continue as the uptick in US capital market yields filters into the market.”
The yield on the US 10-year note climbed to 2.99 for the first time since 2014 at the outset of a week packed with key economic data releases and new debt supply, Bloomberg reported.
This includes GDP and jobless claims in the US, while earnings season continues including Alphabet/Google, Amazon.com, Samsung and Credit Suisse. The European Central Bank has a rate decision on Thursday. “Investors will watch for any sign that officials are preparing a shift in stimulus plans for their June meeting,” Bloomberg said.
According to Reuters report, however, the rand is set to bounce back during the course of the week as the local currency continues to align itself with global growth, “a positive scenario for emerging market currencies”.
“Market positioning, as reflected by the Commodity Futures Trading Commission indicates a high conviction in the current ‘narrative’ – i.e. that global synchronised growth will continue,” said Nedbank analysts Mehul Daya and Walter de Wet in a note, as reported by Reuters. The analysts also noted fewer domestic risks were in play.
- Dollar/Rand: R12.26 (1.73%)
- Pound/Rand: R17.13 (1.40%)
- Euro/Rand: R15.00 (1.20%)
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