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Rand steady in early trade, but emerging market jitters remain

Apr 11 2018 11:23

Cape Town - The rand was steady in early trade on Wednesday morning, opening at R12.02 to the dollar and changing hands at R12.04 by 09:56. 

TreasuryONE senior currency dealer Andre Botha said that apart from the latest developments in the US/China trade dispute, market watchers would also be closely following the fallout from sanctions placed by the US on certain Russian oligarchs, as well as financial troubles in Turkey.

Like South Africa, Turkey and Russia are both important emerging markets.  

Botha said new US sanctions "hit the financial markets hard in Russia with the stock market down by 8.3% [on Tuesday]".

He said this could create risk aversion to the Russian market, which in turn could impact other emerging markets. Similarly, Turkey’s interest rate stand-off between its prime minister and its central bank will also have a knock-on effect on emerging markets in the short term. 

He noted that the rand “held up well” against a backdrop of emerging market weakness. 

“[However] it does not take a lot for the rand to join the other emerging markets in faltering,” Botha added.

“The longer the Russian and Turkey headlines are still doing the rounds, the more risk-averse the emerging markets will become.”

Little economic data is expected to be released in South Africa on Wednesday, but the US is set to release its CPI, or consumer price index data.

Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions, said one reason the rand has not fallen further is its positive reaction to a pro-global trade speech by Chinese leader Xi Jinping. 

Xi's speech on Tuesday, in which he warned against returning to a 'Cold War mentality' amid his trade disputes with US counterpart Donald Trump, dampened fears that the trade tariff dispute between the two countries would worsen.

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xi jinping  |  markets  |  currencies  |  rand  |  trade war


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