A look at the rand’s wild ride ahead of Ramaphosa’s SONA

The rand has been on a tumultuous ride in the 12 months since the 2020 State of the Nation Address (SONA), says Bianca Botes, executive director at Peregrine Treasury Solutions.

Having traded below the R15 to the dollar mark a year ago, the local unit quickly stepped off a cliff, weakening significantly above the R19 to the dollar mark in April as Covid-19 panic took hold of markets, she said.

“However, after a fairly dramatic dive, the rand then spent the next 10 months clawing its way back to its starting position below R15 to the dollar as we look forward to the 2021 SONA, coming full circle as global sentiment worked in the rand’s favour.”

With such dramatic movements, it is little wonder that traders have nicknamed the dollar/rand pairing ‘the rattler’, she said.

Below, Botes and Peregrine provided a more detailed breakdown of how major events have impacted the local currency over the last year.

Examining the infographic, South Africa’s lockdown restrictions appear visually to have influenced the rand’s movements, said Botes.

“But in reality, global factors such as stimulus, liquidity, risk-on sentiment and the hunt for yield have played a much larger role in the rand’s strengthening over the past few months,” she said.

“As local focus shifts to president Ramaphosa’s speech, we will be watching carefully for any insights into government’s economic policies, as well as how government intends to address the glaring issues at state-owned enterprises such as Eskom and SAA, which continue to weigh heavily on the country’s already over-burdened balance sheet.”

Internationally, little has changed in the global backdrop as markets await further details on the US Democrat’s stimulus plan and start gearing up locally for tomorrow’s State of the Nation Address, said Botes.

In the meantime, global optimism on economic recovery, driven by the expected enormous stimulus and widespread vaccination programmes, continues to support the rand, she said.

The rand traded at the following levels against the major currencies at 11h30 on Wednesday (10 February):

  • R14.68/dollar (-0.27%)
  • R17.81/euro (-0.20%)
  • R20.33/pound (-0.04%)

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A look at the rand’s wild ride ahead of Ramaphosa’s SONA