The rand touched its strongest levels in a month on Monday, while the JSE closed weaker with this week’s focus on policy decision from the US Federal Reserve.
The local currency firmed for the eighth consecutive session — the longest winning streak in almost two years — as efforts by the SA government to strike a neutral balance in its stance on the Russian invasion of Ukraine eased fears of geopolitical risks.
President Cyril Ramaphosa will soon go to Russia to persuade President Vladimir Putin to join the Johannesburg Brics summit online.
According to reports by Business Day, Ramaphosa will also visit Ukraine, whose invasion by Russia has drawn condemnation from SA’s biggest trading partners, to possibly affirm SA’s official pledge as non-aligned in the conflict.
“The rand has pulled stronger from the worst levels seen in recent days as the SA government seeks to dampen down its relationship with Russia to strike a neutral balance,” said Investec chief economist Annabel Bishop. “Additionally, the state proactively working to resolve the electricity crisis has supported the rand.”
Business Day reported earlier that a notable improvement in Eskom’s generation capacity in the last week resulted in its energy availability factor (EAF) — the amount of energy available compared to installed capacity — rising on June 2 by seven percentage points to 60%, a level last seen in September 2022.
This has led to lower stages of load-shedding or no load-shedding at all on some days.
At 6.07pm, the rand had strengthened 0.84% to R18.5613/$ — reaching the intraday best of R18.50/$. It had firmed 0.86% to R19.9513/€ and 1.39% to R23.1946/£. The euro was unchanged at $1.0748.
The rand was heavily oversold on levels in May, and June’s recovery could see momentum towards R18.00/$, said Bishop.
Markets expect the federal open market committee (FOMC) to hold interest rates unchanged in a range of 5%-5.25% when they meet from 13-14 June. However, investors are expecting policymakers to give a stern talk about their commitment to bringing down inflation, which leaves open the option to resume raising rates at the central bank’s July meeting.
“Investors are seeking to gauge the Fed’s appetite for further rate hikes in the future, as well as the potential for any rate cuts towards the latter part of the year,” said Citadel Global director Bianca Botes.
The JSE all share lost 0.85% to 76,282 points and the top 40 0.88%, with major indices mostly down.
At 6pm, the Dow Jones industrial average was 0.12% firmer at 33,929 points, while markets had pared gains in Europe.
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