The rand attempted a rebound on Tuesday, while the JSE fell the most in more than a month as investors assessed geopolitical developments in the US.
The local currency fell as much as 1.6% in the previous session amid a risk-off mood session that was “largely driven by offshore investors who dumped riskier assets in favour of safe havens”, RMB head of forex execution Matete Thulare said.
The risk-off sentiment comes after the attempted assassination of former US president Donald Trump over the weekend, with bets increasing that Trump would win the November election.
“After the rand weakness on Monday, news on interest rate cuts in the US helped the local currency recover some lost ground,” TreasuryOne currency strategist Andre Cilliers said.
Speaking at an event in Washington on Monday, Federal Reserve chair Jerome Powell said the three US inflation readings over the second quarter of this year “add somewhat to confidence” that the pace of price increases was returning to the Fed’s target in a sustainable way, remarks that suggested a turn to interest rate cuts might not be far off, Reuters reported.
“Powell signalling that interest rate cuts are likely on the horizon led to a bullish outlook for currencies and bonds in developed markets,” Cilliers said. “Although Powell didn’t specify a timeline, traders expect the first cut in September, followed by two more by the year’s end. This has led to increased expectations for policy easing in various economies.
“Despite this optimism, political factors could affect the debt of the US. The upcoming US election, with Trump’s rising chances, could lead to higher tariffs and tax cuts, impacting long-term US bonds,” Cilliers said. “For now, with no interest rate cut expected locally on Thursday, the rand will look at the international front for cues.”
At 5.54pm, the rand had strengthened 0.67% to R18.0896/$, 0.78% to R19.6896/€ and 0.59% to R23.4379/£. The euro was little changed at $1.885.
Meanwhile, China’s GDP growth numbers for the second quarter came out weaker than expected, indicating that its export growth outperformance is encountering incremental headwinds.
“Intensifying adverse trade conditions for Chinese industrial goods in key major markets, presents growing risks to China’s GDP growth momentum,” RMB analysts said. “The concomitant negative ramifications for industrial commodity prices, with China accounting for close to 50% of global consumption across a range of industrial commodities, pose risks to SA’s terms of trade in the months ahead.”
The JSE all share fell 1.25% to 81,124 points — with major indices weaker except the precious metals and resources indices. The top 40 was down 1.5%.
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