Rand falls, again
South Africa's rand weakened in early trade on Wednesday as investor optimism over the US-Mexico trade deal was dimmed by concerns that the China-US trade war will drag on for some time, hurting appetite for riskier assets.
At 0643 GMT, the rand traded at 14.3000 per dollar, 0.49% weaker than its close on Tuesday.
Risk appetite was boosted earlier this week after the United States and Mexico agreed to overhaul the North American Free Trade Agreement, putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the pact.
The rand tumbled to two-year lows just shy of 16 earlier this month as a massive selloff of the Turkish lira spread to other emerging markets. The South African currency has since recovered but trading remains volatile.
“Even though concerns over possible contagion from Turkey have eased, there is simply far too much event risk at play,” Rand Merchant Bank analyst Nema Ramkhelawan-Bhana wrote in a note.
“The U.S. appears to have sidelined talks with China in favour of solidifying an accord with Mexico and Canada while Moody's downgraded 20 of Turkey's financial institutions, warning that the worst is still to come. Expect trade to be choppy today.”
Stocks were set to open lower at 0700 GMT, with the JSE securities exchange's Top-40 futures index down 0.15%.
In fixed income, the yield on the benchmark government bond due in 2026 was up 3.5 basis points at 8.91%.
TRUMP TWEET
The rand has of recent been experiencing falls. Last week, the rand slumped against the dollar after a tweet by US President Donald Trump on the country's land debate fueled speculation of possible sanctions against the country.
The currency weakened as much as 1.7% after Trump said he asked US Secretary of State Mike Pompeo “to closely study the South Africa land and farm seizures and expropriations”. The South African government hit back, tweeting that it “totally rejects this narrow perception which only seeks to divide our nation.”
The US's acting ambassador to the country will be summoned to explain Trump's comments, two people familiar with the situation said Thursday. He was intervening in an ongoing debate about whether South Africa should implement a policy of seizing land without paying for it in a bid to address inequalities built up during apartheid.
The comment raised concern that the US could target South Africa with economic sanctions having already moved against Turkey, a decision that would weaken the rand further, according to Hironori Sannami, an emerging-market currency trader at Mizuho Bank.
The rand was 1.3% weaker at 14.3466 per dollar by 08:23 in Johannesburg. Yields on benchmark 2026 government bonds rose 4 basis points to 8.97%.
On Wednesday, South African President Cyril Ramaphosa told Parliament that increasing access to land for the poor would happen in an orderly fashion and would initially focus on making state property available. The rand strengthened on his comments.
“One tweet does not make a book,” said Warrick Butler, a currency trader at Standard Bank Group “There are far too many other components affecting the rand. If the dollar reverses its recent correction then so too will the rand regardless of Twitter.”-Nampa/Reuters and Fin24
At 0643 GMT, the rand traded at 14.3000 per dollar, 0.49% weaker than its close on Tuesday.
Risk appetite was boosted earlier this week after the United States and Mexico agreed to overhaul the North American Free Trade Agreement, putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the pact.
The rand tumbled to two-year lows just shy of 16 earlier this month as a massive selloff of the Turkish lira spread to other emerging markets. The South African currency has since recovered but trading remains volatile.
“Even though concerns over possible contagion from Turkey have eased, there is simply far too much event risk at play,” Rand Merchant Bank analyst Nema Ramkhelawan-Bhana wrote in a note.
“The U.S. appears to have sidelined talks with China in favour of solidifying an accord with Mexico and Canada while Moody's downgraded 20 of Turkey's financial institutions, warning that the worst is still to come. Expect trade to be choppy today.”
Stocks were set to open lower at 0700 GMT, with the JSE securities exchange's Top-40 futures index down 0.15%.
In fixed income, the yield on the benchmark government bond due in 2026 was up 3.5 basis points at 8.91%.
TRUMP TWEET
The rand has of recent been experiencing falls. Last week, the rand slumped against the dollar after a tweet by US President Donald Trump on the country's land debate fueled speculation of possible sanctions against the country.
The currency weakened as much as 1.7% after Trump said he asked US Secretary of State Mike Pompeo “to closely study the South Africa land and farm seizures and expropriations”. The South African government hit back, tweeting that it “totally rejects this narrow perception which only seeks to divide our nation.”
The US's acting ambassador to the country will be summoned to explain Trump's comments, two people familiar with the situation said Thursday. He was intervening in an ongoing debate about whether South Africa should implement a policy of seizing land without paying for it in a bid to address inequalities built up during apartheid.
The comment raised concern that the US could target South Africa with economic sanctions having already moved against Turkey, a decision that would weaken the rand further, according to Hironori Sannami, an emerging-market currency trader at Mizuho Bank.
The rand was 1.3% weaker at 14.3466 per dollar by 08:23 in Johannesburg. Yields on benchmark 2026 government bonds rose 4 basis points to 8.97%.
On Wednesday, South African President Cyril Ramaphosa told Parliament that increasing access to land for the poor would happen in an orderly fashion and would initially focus on making state property available. The rand strengthened on his comments.
“One tweet does not make a book,” said Warrick Butler, a currency trader at Standard Bank Group “There are far too many other components affecting the rand. If the dollar reverses its recent correction then so too will the rand regardless of Twitter.”-Nampa/Reuters and Fin24
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