Markets WRAP: Rand closes at R14.89/$

The rand closed at R14.89 to the greenback on Monday afternoon.

TreasuryONE said in a note to clients earlier that market turmoil seemed to be the order of the day as the ongoing US/China Trade War caused panic. The rand was expected to remain on the backfoot in the short term.

The trade war is taking a turn for the worse just as investors digest one of the roughest weeks for emerging markets this year. China responded to Donald Trump’s tariff threat with another escalation of the trade war on Monday, letting the yuan slide past 7 to the dollar to the weakest level in more than a decade.

Trump last week threatened to put 10% tariffs on a further $300bn of the country’s goods. The latest showdown puts the Asian nation’s trade data on Thursday in the spotlight amid concern the year-long dispute is hurting its economy.

Rand weakens on renewed China/US trade war fears

The rand again weakened against the dollar on Monday morning, compounding losses from last week. 

The local currency opened trade at R14.74 to the greenback and was changing hands at R14.94/$ at 13:20, down 1.09%. 

Oil resumes drop as demand fears overshadow Iran tanker seizure

Tsuyoshi Inajima

Oil has resumed its decline as a sharp drop in the Chinese yuan compounded fears that a deepening trade war will depress demand, countering concerns crude flows may be disrupted following Iran’s seizure of another ship.

Futures lost as much as 1.5% in New York. The yuan weakened beyond 7 a dollar for the first time in more than a decade after President Donald Trump said Friday he can raise tariffs on China to a “much higher number.”

That followed his threat the day before to increase levies, which spurred the steepest one-day drop in crude prices in more than four years.

Iran seized a foreign tanker in the Persian Gulf on July 31, the Revolutionary Guards said on their Sepah News portal Sunday, without giving any details about the vessel.

Markets LIVE: Yuan tumbles as Asian stocks plunge

Andreea Papuc, Bloomberg

China’s yuan fell past 7 per dollar, a level that had long been a focus for investors as a line in the sand for the country’s policymakers. The move escalated concerns about the US-China trade war, spurring the biggest sell-off in Asian stocks since October.

The Japanese yen jumped along with US Treasuries as traders bought haven assets. Shares slumped as much as 3.1% in Hong Kong, which is also seeing turmoil from rising political tensions.

Japanese and Korean equities slid more than 2% and S&P 500 Index futures tumbled more than 1%.

European futures declined. Stocks took another leg lower after Bloomberg reported that China has asked state purchasers to halt imports of American agricultural products. Gold advanced.

“The market needs a circuit-breaker,” such as a more aggressive Federal Reserve or a resumption of US-China talks, Jonathan Cavenagh, head of foreign-exchange strategy emerging Asia at JPMorgan Chase & Co. in Singapore, said on Bloomberg Television. “If you see enough US equity-market weakness, if you see enough downward momentum in economic data, then both sides may come back to the negotiating table at some stage. But I don’t think that’s going to happen at least in the near term.”

Chinese stocks saw more modest declines than the rest of the region, amid speculation policymakers may boost stimulus as the trade war escalates. China’s yuan saw its biggest drop since August 2015, when officials announced a surprise devaluation that roiled markets at the time.

The People’s Bank of China said that it is able to keep the currency stable and at a reasonable level, and that it passed 7 per dollar because of trade protectionism.