Rand on track for best week in three months

Positive local economic data and a thaw in the US-China trade war this week put the rand on track for its best weekly performance in almost three months on Friday afternoon.

SA’s better-than-expected second-quarter economic performance and news that the US and China would resume trade talks has lifted the currency 2.7% against the dollar so far this week, although risks loom in the form of US economic data later on Friday.

A move by the UK parliament to block a no-deal Brexit, as well as the formation of a new governing coalition in Italy, has also lifted sentiment, while the risk of political protests in Hong Kong has eased following the withdrawal of a controversial extradition bill.

At 2.35pm, the rand had firmed 0.9% to R14.7491/$, 0.95% to R18.1534/£, and 1.07% to R16.2662/€. The euro was little changed at $1.1029.

The rand extended gains a little and the dollar weakened on Friday afternoon, following the major economic report of the week, that US non-farm payrolls for August. US employers added 130,000 jobs in August, less than the 164,000 expected by the market, although wage growth was slightly higher than expected.

If the release had met or exceeded market expectations, it would have moderated market expectations of deep US Federal Reserve interest rate cuts, said FXTM senior market analyst Lukman Otunuga in a note.

Interest rate cuts in the US would benefit the rand as it makes local bonds relatively more attractive.

The rand has largely brushed off negative domestic news this week, with attacks on foreign nationals and their businesses in SA have led to a retaliation against SA businesses in other African countries.

The rand can be expected to remain below R15/$ for the time being, said Peregrine Treasury Solutions corporate treasury manager Bianca Botes in a note. “However, any escalation of tension would see the rand rapidly lose ground again.” 

- BusinessLIVE