Rand holds on to post-cabinet boost
The rand was a little firmer against the the dollar on Thursday afternoon, continuing to recover from the seven-month low it reached on Wednesday, as global sentiment improved a little and markets considered SA’s new cabinet.
Analysts welcomed President Cyril Ramaphosa’s announcement of his executive late on Wednesday night, citing both its composition and a reduction in size.
The local currency had strengthened 0.4% to R14.67/$ shortly after Ramaphosa’s announcement, having earlier reached an intra-day low of R14.89/$. Markets had been closely watching the composition and size of the cabinet, which has been reduced from 36 to 28 ministers. Cabinet members in some key portfolios retained their positions, including finance minister Tito Mboweni.
At 2pm on Thursday the rand had firmed 0.32% to R14.6072/$, 0.27% to R16.2662/€ and 0.31% to R18.4457/£. The euro was flat at $1.1136.
It appeared, however, that traders had been pricing in some disappointment regarding the cabinet ahead of the announcement, said independent technical analyst Frans de Klerk. This was apparent earlier in the week when the rand weakened past R14.50/$ on news that ANC deputy president David Mabuza was set to return to the government. Other factors, however, including the rebalancing of MSCI’s emerging market index, had also weighed on the rand.
The rand has yet to firm below R14.50/$, which, if it happens, could reflect a well-received cabinet, said De Klerk. He added that should it do so, a push to R14.25/$, which is considered a support level, could happen.
Local focus remains on the US-China trade war, with global risk assets coming under pressure on Wednesday due to hints that the Chinese government is gearing up to retaliate against US tariffs.
Sentiment improved a little on Thursday, but the rand was only the sixth best performing emerging-market currency, according to Bloomberg data.
The rand has still lost about 1.5% against the dollar this week, while the Turkish lira — which remains the most volatile emerging-market currency — has firmed 3.2% against it. Reuters reported on Thursday that the US and Turkey had agreed to work on a dispute related to the latter’s purchase of a Russian-made missile system.