Rand subdued as global risk falters

The rand was flat against the dollar on Thursday afternoon, as geopolitical events continue to drive market sentiment.

Earlier this week, US President Donald Trump said that he was ready to impose further tariffs on Chinese imports should he and President Xi Jinping not reach a trade agreement at the G20 summit later in June. On Wednesday, Trump also threatened to impose sanctions against Berlin for supporting the Nord Stream 2 natural gas pipeline from Russia to Germany. 

“The risk environment is faltering globally, despite a weaker out-turn in US monthly inflation that reinforced expectations of US Federal Reserve cuts, as negative trade rhetoric overshadowed any fundamental improvements in conditions for emerging-market assets,” said Rand Merchant Bank analyst, Nema Ramkhelawan-Bhana. “The US remains the common antagonist in global geopolitical spats.”

By 2.10pm, the rand was little changed at R14.8596/$ and R16.7743/€. The local currency had strengthened 0.18% to R18.8396/£, as markets monitor the race for the next UK Prime Minister. The euro was little changed at $1,1287. 

The benchmark R186 government bond was weaker, with its yield rising six basis points to 8.41%. Bond yields move inversely to bond prices.

Gold had gained 0.21% to $1,336/oz and platinum 0.11% to $810.88. Brent crude climbed 4.62% to $62.54 a barrel, following attacks on two tankers in the Gulf of Oman. 

Locally, mining production for April contracted 1.5% year-on-year. Gold production fell 19.7% year-on-year in the same period. The RMB/BER business confidence index was unchanged for the second quarter of 2019 at 28 points.

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