Rand steady near R14/$ despite weak local data

01 July 2019 - 16:26 By karl gernetzky
Picture: REUTERS
Picture: REUTERS

The rand was slightly weaker against the dollar on Monday afternoon, giving up earlier gains, as markets continued to digest a ceasefire in the US-China trade war.

The rand was perhaps not benefiting — as would be expected from a risk-on environment — due to signs of domestic economic weakness, analysts said, with the local currency also contending with a weaker gold price and higher oil price.

At 2pm the rand was 0.17% weaker at R14.1221/$, while remaining flat at R16.0241/€, and firming 0.27% to R17.8544/£. The euro had weakened 0.12% to $1.1347.

The Turkish lira was by far the best-performing emerging-market currency, up 1.29% against the greenback.

Brent oil was 3.32% higher at $66.54 a barrel, while gold had weakened 1.18% to $1,392.52/oz.

Investor interest in the lira was probably due to the high yields being offered by the currency, while issues of US sanctions on the country were also in the backseat, Monex Europe forex market analyst Simon Harvey said.

Markets were still focused on slowing global growth, said Harvey, while SA's economic underperformance may also become a factor. SA was benefiting from inflows of foreign direct investment, but this could unwind a little if data continued to show a further slowdown, he said.

"Generally across the emerging market space it looks tentative — focus will be on US nonfarm payrolls numbers on Friday,” Harvey said.

Earlier, the Absa/BER purchasing managers' index beat market expectations, coming in at 46.2 index points, compared to the 46 expected by the market.

This indicated that conditions in the manufacturing sector remained subdued, analysts said.

Overall the rand was continuing to benefit from expectations of dovish global central bank policy, despite poor local economic data, Investec chief economist Annabel Bishop said in a note.

The rand could strengthen further in 2019, but this was more likely to take place in the fourth quarter, as experience showed global mood was risk-off in the third quarter, Bishop said.