Rand reaches three-month high following US-China detente

01 July 2019 - 10:00 By karl gernetzky
Picture: REUTERS
Picture: REUTERS

A ceasefire in the US-China trade war helped lift the rand to its best level against the dollar in three months on Monday morning, but the local currency was facing headwinds in the form of volatile commodity prices.

At the G20 summit in Japan at the weekend, US President Donald Trump and Chinese President Xi Jinping agreed in principle to restart trade talks. Markets also cheered a US commitment to relax restrictions on US tech-giant Huawei.

Risk assets benefited, but the gold price did not. At 9.20am bullion was 1.82% lower at $1,383.45 an ounce. The rand often suffers along with a falling gold price, as gold is a key foreign-exchange earner for SA.

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At the same time, the rand was 0.23% weaker at R14.1312 to the dollar, having earlier firmed to R14.0353 to the dollar — a three-month high. It was flat at R15.9965 to the euro and at R17.9055 to the pound. The euro was 0.36% weaker at $1.132.

Oil was sharply higher, rising 3.42% to $66.60 a barrel, amid reports Saudi Arabia and Russia had agreed to extend production cuts.

The rand has now approached a “rather decent” support trend line of about R14-R14.05 to the dollar, said Standard Bank currency trader Warrick Butler. This was a line going back to early 2018, but there was some cause to be cautious in the early part of the week, Butler said.