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Rand hits 2-week high after Obama win

Nov 07 2012 10:00 Reuters


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Johannesburg - The rand hit a two-week high on Wednesday as US President Barack Obama won a second term in the White House, signalling a continuation of the economic policies of the world’s biggest economy.

The rand was at R8.6050/$ at 08:56, 0.3% firmer than its close in New York on Tuesday.

After Obama defeated Republican opponent Mitt Romney in a close contest, the dollar weakened, supporting emerging market currencies such as the rand.

“The initial response has been for the markets to price in a continuation of what already exists, i.e. big government that needs to borrow large sums of money that in part will be funded through more dollar-debasing quantitative easing,” analysts at Tradition Analytics wrote.

The longer-term implications of Obama’s victory for the rand are not clear cut.

While it suggests a continuation of quantitative easing, which would bolster the rand, a gridlocked Congress could mean the so-called “fiscal cliff” will be difficult to avert.

“With mixed power in Washington, the chance of hitting the fiscal cliff has increased - rand negative,” Rand Merchant Bank analysts wrote.

“With Obama back in the seat, war with Iran and aggressive domestic spending cuts look less likely, while the probability of a second term for Bernanke and therefore more QE have increased - rand positive.”    

Government bonds were steady, with the yield on the 2026  and 2015 instruments barely changed at 7.650% and 5.480% respectively.
barack obama  |  currencies  |  rand  |  us elections 2012

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