Rand and bonds push to three-week highs on election optimism

The rand was one of the best-performing emerging-market currencies on Friday afternoon, lifted by an improved global mood, and by the local election results, which continue to come in.

After sharp losses on Thursday, global risk assets were back in favour on Friday as investors clung to hopes that a positive resolution to the US-China trade conflict can be found. Negotiations between the two countries continue on Friday, even as the US raises tariffs on $200bn worth of Chinese imports from 10% to 25%.

However, US President Donald Trump said he would start the “paperwork” on Friday for 25% duties on a further $325bn of Chinese imports.

Locally, the governing ANC looks set to receive about 57% of the national vote, with analysts having said previously anything between 55% and 60% would be well received by the market. Such an outcome is seen as likely to boost President Cyril Ramaphosa’s chances of pushing through his pro-growth policies.

The rand’s volatility has dropped, and local bonds have pushed to three-week highs. The rand is expected to be the third-most volatile currency over the next week, according to Bloomberg data, behind the Brazilian real and Turkish lira.

At 2.06pm, the rand was up 0.93% at R14.2132/$, 0.74% at R15.9647/€, and 0.87% at R18.4963/£.

The benchmark R186 government bond was bid at 8.45%, from 8.54%, its strongest level in three weeks.

The local election news is probably not enough to push the rand past the key R14.17/$ level, said Nedbank Corporate and Investment Banking strategist Neels Heyneke, adding that the US-China trade developments would probably ultimately determine the local currency’s direction.

Heyneke added that the R186 bond was also pushing to the key 8.38% level, but from a technical standpoint, it did not seem that this break would materialise.

- BusinessLIVE