South Africa’s currency has regained some of its strength lost ahead of the 2019 budget speech – helped by international factors, and a likelihood that Moody’s will spare the country from a downgrade next month.<\/p>\n
According to Bianco Botes, corporate treasury manager at Peregrine Treasury Solutions, currency markets largely priced in the postponement of the 1 March deadline for a trade agreement to be reached between the US and China, announced by President Trump on Monday (25 February).<\/p>\n
“As a result, the rand along with other emerging markets managed to gain ground against the greenback, breaking through the key R13.90 level during trade,” she said.<\/p>\n
Markets will look towards Federal Reserve chairman Jerome Powell\u2019s testimony today when he delivers his semi-annual update to reaffirm the Fed\u2019s stance on interest rates as well as anticipated economic conditions, Botes said.<\/p>\n
According to Reuters economists, Trump\u2019s announcement to postpone is the clearest sign yet that China and the United States were near an agreement to end a trade war that has slowed global growth and disrupted markets.<\/p>\n
\u201cThe suggestion from President Trump that he is planning for a summit for President Xi and himself will also raise investor excitement that a resolution to this long-standing trade conflict is nearing a conclusion,\u201d Jameel Ahmad, global head of currency strategy & market research at FXTM, said in a note.<\/p>\n
The rand took a knock pre-budget and post speech last week, with finance minister Tito Mboweni announcing that the South African government would bail out Eskom to the tune of R69 billion.<\/p>\n
Mboweni also pointed to a slower growth forecast, wider budget deficit and limited room to manoeuvre.<\/p>\n
However, despite the problems, the market received the budget positively, because of its frankness and transparency in dealing with South Africa’s problems.<\/p>\n
Ratings agency Moody’s – the last to have South Africa above investment grade – said that the budget showed South Africa’s challenges, but noted that the country’s debt structures were in a good position, and if Eskom and other SOEs are dealt with using a solid plan of action (made available publicly), the country could turn things around.<\/p>\n
Here’s how the the rand is performing against the major currencies:<\/p>\n