Markets WRAP: Rand closes at R14.91/$

Here's how Friday closed: 

USDZAR 14.9134

EURUSD 1.1337

EURZAR 16.8988

GBPUSD 1.2756

GBPZAR 19.0131

AUDZAR 10.4560

CADZAR 11.2213

CNYZAR 2.1559

ZARJPY 7.2417

CHFZAR 15.1038

R186 8.46%

US 10 Year 2.07%

JSE 2.00%

FTSE 1.15%

S&P 500 1.30%

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Pound may fall 2% if Boris Johnson becomes UK prime minister, survey shows

The pound may slide to a two-year low if a hardline eurosceptic takes over as the UK Prime Minister, according to a Bloomberg survey of analysts.

Sterling could drop more than 2% to $1.24 in the event a Brexiteer such as front-runner Boris Johnson replaces Theresa May after she formally steps down Friday, according to the poll.

Still, the currency will avoid a bigger drop on the conviction that Parliament will foil any efforts to leave the EU without a deal.

Rand's bad week set to get worse amid Eskom and economy concerns

Colleen Goko, Bloomberg

The rand is on track for its worst week against the dollar since October, and technical indicators suggest more pain is in store for the currency amid rising political risks and concern about the country’s economic outlook.

Gross domestic product data released earlier this week showed South Africa had its worst quarterly performance since 2009 in the three months through March. Infighting within the African National Congress over the mandate of the country’s Reserve Bank exacerbated losses as investors questioned whether President Cyril Ramaphosa has enough support to advance his reform agenda.

To add to investors’ worries, state-owned companies from Eskom to South African Airways are back in the spotlight, and for all the wrong reasons.

South Africa may be unable to continue supporting electricity utility Eskom, S&P Global Ratings said.

The leaderless state-owned airline is continuing its search for a new chief executive while discussing debt terms with banks.

“It’s a case of the perfect Molotov cocktail,” said Matete Thulare, an analyst at FirstRand Bank. “Without sounding too gloomy, the picture looks very grim.”

The rand fell as much as 1.2% on Friday, and traded 0.6% weaker at R15.08 per dollar by noon, bringing its decline this week to 3.4%, the most since the five days ending October 5.

“The year-to-date upside trend in USD/ZAR remains intact,” said Piotr Matys, a currency strategist at Rabobank in London. “The underlying trend in the South African economy is clearly weak and the outlook will remain challenging until significant progress is made in implementing structural reforms.”

The rand’s relative strength index, a momentum indicator that signals when a currency is overbought or oversold, shows that the rand has more room to fall.

The measure is still lower than the 70 level which would signal to some traders that the dollar is overbought.

Rand down in early trade 

The rand continued to fall in early trade on Friday, a day after a public spat about the mandate of the SA Reserve Bank unsettled markets.  

The local currency opened at 14.99 and was trading at R15.10 to the greenback at 08:30, its lowest rate in eight months.

Ramaphosa: Policy on SARB 'has not changed'

President Cyril Ramaphosa issued a statement on Thursday evening reaffirming the mandate of the South African Reserve Bank and describing the current spat as "not helpful".

Describing discussions held at the ANC Lekgotla on 1-3 June, Ramaphosa said: "The Officials emphasised the policy positions of the ANC on the independence and role of the SARB as set out in the Constitution of the Republic of South Africa [which is] protecting 'the value of the currency in the interest of balanced and sustainable economic growth'".