Nedbank Capital Archives - African Financial & Economic Data

Trump’s Trade War Could Hit South African Rand Through Oil Price

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.

“It’s all due to those trade wars and a lot of uncertainty,” said Marius Grobler, a trader at Unum Capital. “Investors are seeing a lot of fear on the market.”

Since 2016, oil has recovered from about $28 to $68 a barrel. That’s supported the rand, strengthening it to below 12 per dollar from more than 16, according to Nedbank.

Read the full article at Bloomberg Markets

South Africa’s rand weaker as demand for emerging currencies wanes

JOHANNESBURG, June 30 (Reuters) – South Africa’s rand weakened further in early trade on Friday as a breach of key technical levels triggered short selling by offshore investors weary of local politics and betting the U.S. economy is on the mend and set for higher interest rates.

* By 0650 GMT the rand had weakened 0.23 percent to 13.0450 per dollar, compared to a close of 13.0150 overnight in New York.

* Better than expected estimates of economic growth in the United States in the previous session chipped away at the rand’s carry trade attraction, with higher yields in U.S. 10 bonds signalling an imminent move away from emerging currencies.

* Possible re-emergence of political noise as the ruling African National Congress begins its week-long policy conference also put the brakes on the rand.

* “Above the 13.00 we initially saw local exporter interest which kept it capped but once the local market called it a day New York pushed the rand as high as 13.0850 in what looked like a typical New York short squeeze,” said Nedbank Capital analyst Reezwana Sumad.

* South Africa publishes May trade data at 12000 GMT.

* Local bonds also suffered, with the yield on the benchmark government issue due in 2026 up 8 basis points to 8.785 percent, a 1-1/2 month high.

* Stocks were set to open lower at 0700 GMT, with the JSE securities exchange’s Top-40 futures index down 0.42 percent. (Reporting by Mfuneko Toyana, editing by Ed Osmond)

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