The path ahead looks challenging for South Africa’s rand, if oil prices are anything to go by.
Concern that U.S. President Donald Trump’s measures will trigger a trade war may hamper global growth and weaken demand for oil, according to Mehul Daya, a strategist at Nedbank in Johannesburg.
“Oil leads the rand,” Daya said. “Sixty percent of the movement in the rand can be explained by changes in the oil price since 1990.”
Talk of tit-for-tat tariffs has already hit the rand and other South African assets. The currency led emerging-market losses Wednesday and was down 0.8 percent to 11.9065 per U.S. dollar as of 2:43 p.m. in Johannesburg. The yield on rand-denominated bonds due December 2026 jumped seven basis points to 8.09 percent. Johannesburg’s equity benchmark tumbled 2.3 percent as escalating tensions between the U.S. and China dragged emerging markets lower.