The rand took a significant hit on Wednesday morning, dropping more than 2% — its biggest one-day decline in more than a year.
The currency’s weakness is largely attributed to projections that former president Donald Trump will reclaim the presidency, with NBC News forecasting 266 electoral college votes in his favour, including the crucial swing state of Pennsylvania, which Trump has officially won with 52.0% of the votes.
The battleground states of Wisconsin and Michigan remain too close to call, while Republicans are expected to retake the Senate. However, control of the House of Representatives hangs in the balance.
A Trump presidency could bring tax cuts, boosting corporate America, but also raised concern about steep tariffs and a potential global trade war, leading to increased uncertainty and inflation. Conversely, a Harris administration could usher in tighter regulations, affecting industries like banking and healthcare, while promoting clean energy could benefit electric vehicle and solar companies, reported Bloomberg.
“The dollar has strengthened, fuelled by both higher treasury yields and a flight to safety amid uncertainties. Investors view Trump’s stance as supportive of economic growth, but also potentially disruptive geopolitically, leading to increased demand for the dollar as a safe-haven currency,” said TreasuryOne currency strategist Andre Cilliers.
“Trump’s potential return could shift US foreign policy, with promises to reshape military commitments, pressure China, and pursue unconventional negotiations with North Korea and Iran. These moves may create a less predictable global environment, increasing safe-haven flows into the [dollar] but potentially stoking volatility in emerging markets,” said Cilliers.
At 10.10am, the rand had weakened 1.76% to R17.6848/$ — having fallen 2.12%, the biggest one-day fall since August 2023. It had weakened 0.16% to R19.0007/€ and 0.63% to R22.767/£. The euro was 1.68% weaker at $1.0742.
“The rand’s recent strength wavered under the pressure of global uncertainties, with resistance levels at R17.8000 and further at R17.8650,” said Cilliers
“If Trump solidifies his lead, the dollar could gain further.... Alternatively, if Harris gains traction, the rand could benefit from a softer dollar, with support levels at R17.4780 and R17.3500,” he said.
At 10.15am, the JSE all share had lost 0.56% to 86,156.50 — with major indices mixed, while the top 40 was down 0.58.
At the same time in Europe, the FTSE 100 had gained 0.68, France’s CAC 40 0.34% and Germany’s DAX 0.57%.
Earlier in Asia, the Shanghai Composite was little changed, while Hong Kong’s Hang Seng fell 2.29% and Japan’s Nikkei added 2.61%.
In the commodities markets, gold lost 0.42% to $2,732.25/oz and platinum 0.88% to $989.76/oz. Brent crude was 1.59% weaker at $74.22 a barrel.
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