Rand set for positive week despite global risk aversion

The rand was slightly firmer on Friday afternoon, set to close higher after a volatile week, amid a host of global and local developments. 

The local currency pushed past R14.50/$ this week as a result of risk aversion in global markets, primarily driven by a prolonged US-China trade war.

However, US President Donald Trump said on Thursday that if the US and China were to reach a trade deal, Chinese telecom giant Huawei would be likely to be included in the agreement. This follows reports that the US could impose Huawei-like sanctions on Chinese video surveillance company Hikvision.

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Efficient Group economist Dawie Roodt said that if the trade war continued, investors would run to where they felt safe — US dollars. “In the short term, the trade war is likely to be dollar positive but rand negative,” he said.

China may possibly use its sizable holdings of US government bonds to retaliate, with China selling $20bn worth of treasuries earlier in the week. “If they try to sell US bonds because they want to get back at the US, then in the short term, the dollar can actually take a bit of a knock.”

At 2.30pm the rand was 0.54% firmer to R14.4111/$, having gained about 0.3% for the week. The local currency was 0.39% firmer at R16.1399/€ and 0.45% to R18.2637/£. The euro gained 0.14% to $1.1197. 

Gold was flat at $1283.51/oz and platinum gained 0.64% to $804.3. Brent crude rose 1.06% to $68.60 a barrel.

The rand was subject to much volatility this week driven by the escalating trade tension, mixed global economic data releases, local political developments and the Reserve Bank's announcement that its next move was most likely to be an interest-rate cut. 

The benchmark R186 government bond had strengthened, with the yield dropping 3.5 basis points to 8.36%. Bond yields move inversely to bond prices.

In terms of political developments on the local front, the rand was slightly boosted by news of some ANC leaders withdrawing from the party's parliamentary nominations list.

President Cyril Ramaphosa will be appointing his cabinet soon after his inauguration at the weekend. The market is watching both the size and the composition of the cabinet, amid questions about the pace and length to which Ramaphosa will pursue an anti-corruption agenda. 

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