How land discussions are directly impacting the rand

·29 Aug 2018

South Africa’s rand is typically influenced by a number of international and local factors – however it has now been made clear how investors feel about the land reform discussions, according to Andre Botha, senior currency dealer at TreasuryOne.

“While we always knew that the land reform bill had a hold of the rand in some form, the extent of this became evident yesterday afternoon when a headline hit the market that the ANC is looking to withdraw its land without compensation bill,” he said.

“We did see the rand rally 20 cents in two minutes on the back of the headline and trading as low as R13.96 on the back of the headline.”

However, he noted that the reality was that digging deeper into the headline, the withdrawal of the bill does not mean that the ruling party is closing the book on the bill, rather that it will be redrafted to be more in line with the ruling party’s vision.

This means that amending the constitution is still very much in the thoughts of the ruling party, he said.

“After digging into the body of the statement, the rand shot back up to the levels it was before the headline broke. This break lower on the rand on the headline is evidence on just exactly how much risk is being priced into the market and how the rand has been affected by the land reform bill.”

He added that Tuesday (28 Tuesday) saw another bout of US dollar weakness due to the US-Mexico trade deal, which whetted the appetite of the market for riskier assets.

“This riskier appetite did not pull through into the rand which also shows the handbrakes that are currently on the rand. We still expect the rand to trade in the ranges it has been this week with the data cupboard empty. The risks at the moment are squarely on headlines with the market looking for direction,” he said.

The rand traded at the following levels against the major currencies in mid-morning trade: