Publications
Partners
Cape Town – The rand dropped by over one percent against the dollar on Tuesday, with weaker Asian markets, a faltering post-Brexit rally and poor South African jobs data putting a dent in the currency.
The rand was trading 1.07% weaker at R14.75 at 10:20 on Tuesday.
The rand “briefly touched its strongest level during yesterday’s European session since Britain elected to opt out of EU, before depreciating after weak local employment data,” explained NKC Research on Tuesday.
Stats SA revealed that South Africa had shed 15 000 jobs in formal non-agricultural sector during January to March 2016 period, with the rand backtracking as result.
“South African currency weakened during Asian trade this morning,” NKC explained, adding that the expected range on Tuesday is between R14.50/$ and R14.95/$.
In comparison to other emerging market currencies, the rand might have been trading too strong on Monday “as it has flipped back into the mid-14.60s overnight, closely in line with Brazilian and Turkish currencies”, explained Adam Phillips of Umkhulu Consulting.
“It was a tall order to see the rand push below R14.40/$ on Monday and I expect another test of 14.70,” he said in a note at 08:00 on Tuesday. “This will test export commodity companies who are enjoying some strength in their sector since the Brexit vote.”
The US holiday on Monday and thin liquidity means the market should be careful in drawing too much from moves in Asian hours, said RMB analyst John Cairns on Tuesday. However, “it looks like the post-Brexit rally has finally faltered”.
“The only issues of any interest are that the Chinese yuan has again pushed slightly weaker, making a fresh five-year low, while a UK poll of business sentiment has shown those negative over the economy jumped from 25% pre-Brexit to 49% post,” said Cairns.
The bond market continued to have a better bid tone to it for most of the day as the rand continued to hold its ground against the major global currencies, said RMB’s Deon Kohlmeyer.
“Although only trading in a narrow three point range, the R186 managed to make a new low of 8.65% before losing some ground by the close.
“Foreigners continue to accumulate SA bonds and today will be another opportunity to gauge their appetite for emerging market assets as we head into the weekly government auction.
“Available will be all the middle-maturity auction stocks, with R2035 (R750m); R2037 (R800m) and R2040 (R800m) on today's menu.
“We expect local investors to be somewhat sceptical at these low levels so it will be up to offshore players to take up the auction today,” he said.
