Rand holds onto its gains

The rand has held onto the gains it made last week, opening at R14.10/$ on Monday morning. It was trading 0.49% stronger at R14.07/$ by 11:00.

The rand and other emerging market (EM) currencies managed to defy the US Federal Reserve Bank’s rate hike and trade tensions last week, Bloomberg reported.

"The Rand showed remarkable resilience in September after testing R15.7000 to close the month of at R14.1000. The resilience of the rand also held, even though the US dollar got on the front foot," Andre Botha, senior dealer at TreasuryONE noted in a market update.

"Whether this has all been down to a sentiment shift in EMs, or the fact that South Africa posted a trade surplus last week, is down to debate, but we suspect it’s a spoonful of the former and a dusting of the latter. The fact remains that EMs are looking a bit rosier and at the moment barring any negative EM shock we could see further EM strength," he added.

Botha said that the mini-budget speech, to be announced later in October, would pose a two-way risk to the rand. "We expect a slight bias for the rand to move lower with the R14.1000 proving stick, and only a significant break of this level will open up the door for significant gains."

Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions, shared views that the focus this month would be on the mini-budget and ratings agency decisions.

• READ: October is high-risk month for rand's recovery

Botes said that local data to be released on Monday, including vehicle sales and the manufacturing PMI, has already been priced in by markets.

"The market has come to terms with the under-performing economy, and any poor data has largely been priced in," Botes said. The trading range for the rand is expected to be R14.00 to R14.30, she said.

ABSA’s purchasing manager’s index came in at 43.2 points for September 2018 - still weak, according to researchers. The average for August was 43.4, below the 50-neutral mark.

The average level of PMI for the third quarter of the year was 46 index points, the lowest average since the third quarter of 2017 and 3.5 points below the average recorded in the second quarter.

This figure also reflects that there is "little hope" that the economy made a strong recovery during the quarter.

RMB economist Mpho Tsebe shared views that a further decline in the PMI indicator would "cast a doubt" on the outlook for the manufacturing sector.

The currency hardly moved on the results, which were released at 11:00. The rand held steady at R14.09/$ by 11:15.

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