The rand was little changed on Thursday morning, having lost more than 2% in the previous session — its biggest one-day fall in almost 10 months — as inflation fears weighed on emerging-market currencies.
China and US both recorded worst-than-expected inflation data on Wednesday, fuelling the fear that the two superpowers would increase interest rates earlier than expected — a move that will make their currencies and investments in their assets relatively more attractive than those of emerging markets.
US Federal Reserve chair Jerome Powell said last week that the Fed would be “patient” before embarking on a tightening policy.
The rand reached a low of R15.4835 in intraday trade, as load-shedding added to the pressure on the currency.
“The biggest jump in US inflation in 30 years stoked inflation fears and saw the dollar strengthen sharply. The rand was the biggest loser in the emerging-market space,” said TreasuryONE currency trader Andre Cilliers.
“The sharp rise in US inflation, reignited concerns that inflation will remain higher for longer than initially anticipated by central banks,” said Cilliers
Analysts said Eskom’s failure to resolve power supply problems and their effect on the SA economy is taking its toll on the rand.
At 9.57am, the rand was little changed at R15.3968/$ and R20.6248/£, while it had strengthened 0.2% to R17.6562/€. The euro was 0.10% weaker at $1.1468.
Locally, the focus shifts to the medium-term budget policy statement (MTBPS) on Thursday afternoon, when finance minister Enoch Godongwana will deliver his maiden medium-term budget speech.
It is widely expected that he will maintain the fiscal path set by his predecessor, Tito Mboweni. Analysts are, however, keen to see just how much of an improvement there has been in SA’s fiscal position after recent good revenue collection from high commodity prices.
“Godongwana needs to have confidence that his best forecasts of future economic growth in SA will not be weakened by uncertain [and] extensive load-shedding,” said North-West University Business School economist Prof Raymond Parsons.
At 10.45am, the JSE all share had gained 0.93% to 68,915.21 points and the top 40 1.13%. Industrial metals had risen 3.61%, resources 2.50%, precious metals 0.52% and industrials 0.49%
Gold gained 0.68% to $1,861.22/oz and platinum 1.6% to $1,087. Brent crude was unchanged at $82.66 a barrel.
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