Rand has one of its worst days in 2018

·24 Apr 2018

South Africa hasn’t seen the rand lose as much ground as it did yesterday in the whole of 2018 so far.

This is according to Andre Botha, market analyst at TreasuryONE, who added that the rand and other emerging market currencies are being “bullied” by a stronger US dollar on the back of rising treasury yields.

“Treasury yields in the US flirted with the 3% psychological level and this coupled with increasing inflation fears after the spike in oil prices has seen the US dollar on the front foot and breaking below the 1.22 level against the euro,” Botha said.

“The US dollar is above 1.22 against the Euro at the moment, but oil is a little higher, which based on the focus that oil is enjoying at the moment seem to suggest the rand could trade weaker today as sentiment is has turned ‘risk-averse’,” he said.

Botha added that in an environment were the trade wars saga has subdued somewhat and the geopolitical tension easing, a lot of focus is levied on the US Treasury yield/inflation story and this will be the short-term market driver.

“This could well mean that the rand is in for a bit of a torrid time in line with other emerging markets, but we expect the rand to reverse some of the losses in the medium-term as we are still one of the favoured ‘carry-trade’ destinations,” he said.

“On the data front, the cupboard is a bit bare today, with the South African leading indicator will be released this morning but we do not expect it to be market moving. Thus the rand would be taking its cues from the global market and with sentiment not being with EM currencies we can see the rand slipping a little today.”

At 09h00 on Tuesday (24 April) the rand was trading at the following levels against the major currencies: