Robust rand brushes off Zuma's SONA

Cape Town – The rand was on firmer footing on Friday morning, trading at R13.32/$ at around 11:00 after showing some jitters earlier on Thursday as violence marred President Jacob Zuma’s 2017 State of the Nation Address. 

John Cairns, currency strategist at RMB, said in a company note on Friday that there was “little for the market in the SONA”. 

“The reality is that there is nothing new in this talk or the promised actions. If there is reason for concern, it was the overall tone of interventionism and increased regulation, but this is probably too subtle to worry the market, given we are in a country where we worry about the firing of the Finance Minister (Pravin Gordhan),” Cairns said. 

READ: Rand recovers after SONA chaos, now focus turns to budget

NKC African Economics said in its morning update that the rand traded stronger on Thursday afternoon, despite an initial weakening due to concerns over the SONA. The rand’s stronger showing was by and large due to negative dollar sentiment on the back of growing concerns that the US administration under a Trump presidency will not deliver on pro-growth policies. 

NKC expects the rand to trade in a range of R13.36/$ to R13.48/$ on Friday. 

André Botha, dealer at TreasuryOne, said in a company note that investors should keep an eye on the €/$ movement on Friday, as its movements will be tracked by the rand. 

He noted that a stronger greenback is usually “bad for the rand”, but the stronger Dow Jones combined with a firmer dollar places the rand in an “interesting” position. 

“It boils down to which rallies harder – should the dollar overshadow Wall Street we can see the rand testing higher and vice versa.” 

Adam Phillips of Umkhulu Consulting said the rand “hardly” reacted to Zuma’s SONA speech.

The rand did weaken to R13.46/$ as violence erupted inside and outside the National Assembly, but quickly settled down to hover at around R13.42 during and after Zuma's speech. 

READ: Economy growing, but not enough to create jobs - Zuma 

“I am slightly surprised as gold is nearly $20 off its levels from Thursday on the back of a stronger US$ versus the Japanese yen,” Phillips said. 

The dollar moved higher against the yen, although Trump wants a weaker currency. “So to push it quite hard against the yen does not make sense,” he added. 

According to Phillips, it wouldn’t be surprising to see the rand trading close to R13.50/$ on the back of the gold price.