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Rand to test above R12/$

Cape Town – Analysts expect the rand to push to R12 against the greenback.

The local unit held steady at about R11.94/$ through the course of Monday morning. It was trading at R11.95 by 11:15. 

Analysts from NKC Economics expect the currency to trade within a range of R11.80/$ to R12./$ on Monday. Wichard Cilliers, director and head of dealing at TreasuryONE, expects the unit to test R12/$.

The debate on land expropriation as well as dollar strength saw the rand correct, following a rally on the back of President Cyril Ramaphosa’s election.

Cilliers explained that the debate on land reform will be a big factor to watch going forward.

“Ultimately, it is too soon to know exactly how these negotiations and debates will unfold. 

“Ideas of nationalising all land in an economy would likely hold major negative consequences for the banking system around which all modern-day economies revolve,” he warned.

Additionally, the rand’s movements have been impacted by developments abroad such as the threat of trade wars by US President Donald Trump, following the announcement of US trade tariffs.

Trump has promised to impose tariffs of 25% for steel and 10% for aluminium imports, and possibly EU vehicle imports.

“As is evident in equity market performance, this is concerning even for South African trade, particularly steel and vehicle exports, which jointly are significant revenue earners for the country,” said RMB economist Isaah Mhlanga.

As a consequence, the dollar slipped. Mhlanga explained that the rand’s weakness could be due to consolidation following its highs and local concerns about land reform.

He said in the week ahead focus will fall on GDP data for the fourth quarter of 2017.

“It’s going to be a busy week from a data perspective, which will bring volatility. Potentially, Trump will steal the show as his words will be louder than the data,” said Mhlanga.

The currency didn’t budge on reports that the source of the listeriosis outbreak was at an Enterprise Foods factory in Polokwane, although the stock of Enterprise owner Tiger Brands took a hammering.

Adam Phillips, treasury specialist at Umkhulu Consulting, explained that euro volatility, given Italian election results, is another factor influencing rand weakness. He added that the rand's movements would continue to be influenced by the euro and developments in the US.


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