Despite a sense of optimism around newly elected president Cyril Ramaphosa and his changes to government, the economic effect of this sentiment is starting to give way to global headwinds.<\/p>\n
The local currency has been riding a ‘wave of change’ that has been sweeping through the country, which has pushed it to almost three-year highs against the dollar.<\/p>\n
However, as month-end demand for the dollar and the re-balancing of portfolios by international investors starts taking effect, the rand has pulled back, giving way for global headwinds.<\/p>\n
By 11h00 on Thursday, the currency was trading weaker against all major currencies – hitting a 2-week low against the dollar:<\/p>\n
The rand has continued a three-session losing streak after markets reacted negatively<\/a><\/strong> to Parliament’s passing a motion to review the country’s land laws, to potentially make way for land expropriation without compensation.<\/p>\n The motion, which passed on Tuesday evening, sparked a brief sell-off that wiped 3.5% off the rand in a matter of minutes, making it the worst performing emerging market currency on the day.<\/p>\n According to\u00a0Gordon Kerr, a fixed income trader at Rand Merchant Bank, the continued weakness into Thursday’s session has more to do with global factors, however, despite being exacerbated by the land issue.<\/p>\n With Ramaphosa’s cabinet reshuffle out of the way, the market has started looking elsewhere, beyond local politics, and repricing in line with the global macro environment, he said in a note.<\/p>\n Bianca Botes, Corporate Treasury Management at Peregrine Treasury Solutions said that the rand has broken through the R11.80\/$ level “with some ease”, and is next targeting R11.90\/$, after which a potential move above R12.00\/$ could be reached “relatively quickly”, she said.<\/p>\n “This correction follows the US Federal Reserve\u2019s announcement that we could potentially see more interest rate hikes than initially anticipated this year.<\/p>\n “Investors are now moving into dollar-denominated assets on the back of the stronger US dollar, but we are also seeing an element of fear in the markets as investors are positioning themselves for a risk-off environment by moving out of riskier emerging market assets,” Botes said.<\/p>\n Reshuffle reaction<\/strong><\/p>\n Ramaphosa’s early week cabinet reshuffle was met with a mixed response, with many lauding the return of Pravin Gordhan and Nhlanlha Nene to government, but scratching their heads over some Zuma allies remaining.<\/p>\n