Rand in a spin as US election results come in
The rand weakened early on Wednesday (6 November) as local markets woke up to former US president Donald Trump taking an early lead in the 2024 election.
The local unit is in volatile territory as markets take in the in-flux US election results, and as other key markets—like China—also plan their next moves.
According to Bloomberg’s live election results tracker, Trump had an electoral college lead over Democratic candidate Kamala Harris at 248 to 214 in a race to the 270 majority required to win the election.
According to Citadel Global director Bianca Botes, the rand has seen some wild swings, gaining traction on Tuesday to trade at R17.40 to the dollar before weakening on the back of the Trump lead on Wednesday, now at R17.78 to the dollar.
- ZAR/USD: R17.78 (+2.30%)
- ZAR/GBP: R22.86 (+0.84%)
- ZAR/EUR: R19.06 (+0.26%)
“As expected, both the US and Asian trading sessions brought volatility to currency markets, as vote counting in the US election continues,” she said, adding that, even though early counting sees Donald Trump in the lead, key states remain undecided.
“The possibility of a Trump win pushed the dollar, treasury yields, and Wall Street futures up in Asian markets—while Bitcoin reached a record high of over $74,000,” she said.
The longer-term impact of a Trump or Harris presidency will take time to filter through markets—particularly their differing trade and foreign relations policies. But the area most South Africans will feel the immediate impact is in the rand.
According to Investec chief economist Annabel Bishop, a Trump presidency will be worse for the rand, largely because his leadership style is characterised by protectionism and sanctions, driving uncertainty.
Harris, meanwhile, has given no indication that policies will shift from what was seen in the Biden presidency.
Other influences
Markets are also awaiting another potential interest rate cut by the US Federal Reserve this week. This is unlikely to be affected by the US election, and economists are still anticipating a 25 basis point cut in what is seen as a slower cutting cycle.
If the US Fed comes in with a bigger cut, this could be more positive for the rand, widening the rate differential. The South African Reserve Bank (SARB) is also expected to cut local rates again later this month, with 25 basis points pencilled in.
Meanwhile, China’s top legislative body, the NPC Standing Committee, is anticipated to announce extensive fiscal spending, projected to be around 10 trillion yuan ($1.4 trillion), when it meets this weekend.
“The new stimulus plan comes after the limited success achieved from its recent monetary stimulus efforts,” Botes said.
China’s weaker economy has been having a wider effect on global markets, particularly with commodities, balancing out the tensions in the Middle East, which have pushed prices higher.
Both gold and oil prices fell, with gold holding close to record levels.
“With all these different moving parts, volatility will remain the order of the day,” Botes said.
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