The rand extended its previous session’s losses on Monday, tumbling more than 2% amid continued volatility.
According to Wichard Cilliers, director and head of market risk at TreasuryONE, the rand’s weakness is largely attributed to dollar strength, fuelled by optimism surrounding president-elect Donald Trump’s policies and anticipated economic data.
“The dollar index surged to the highest level since early July on the day, marking a six-week streak of gains,” said Cilliers.
“Market sentiment remains fuelled by expectations that Trump’s policies, particularly tax cuts and deregulation, will support businesses, potentially driving inflation and limiting the Fed’s ability to cut rates,” said Cilliers.
At 5.56pm, the rand had fallen 2.16% to R17.969/$, touching the weakest level in two months at R17.991/$. It had weakened 1.4% to R19.1186/€ and 1.86% to R23.1214/£. The euro was 0.73% weaker at $1.0639.
“The dollar’s rise has weighed on global markets, especially commodities, as investors await clarity on US policy,” said Cilliers.
Market participants are assessing the economy’s better-than-expected resilience. The US Federal Reserve’s interest rate cuts have helped control inflation to near the 2% target, and sustain job market growth. However, Trump’s policies, including potential tariffs, may drive inflation and national debt higher, leading economists to revise forecasts for future rate cuts, reported Bloomberg.
According to CME Group’s Fed Watch tool, the probability of a Fed interest rate cut in December has decreased to 69%, down from 80% last week.
This week, investors will focus on key US economic data releases, including consumer and producer inflation rates, and retail sales figures. Additionally, comments from various Fed officials will provide valuable insights into the Fed’s policy direction.
Investors were assessing China’s recently announced 6-trillion yuan stimulus package, which fell short of expectations. The package aims to refinance local government debt and boost growth in China’s economy.
“While China’s debt package to ease local government debt is substantial, it fell short of investors’ hopes for more direct economic stimulus,” Citadel Global director Bianca Botes said.
“Beijing hinted at future stimulus but gave no timeline, with analysts suggesting China may be waiting to gauge US policy under president-elect Trump. This caution reflects China’s intent to preserve its options in case of further trade tensions,” added Botes.
The JSE all share lost 0.41% to 84,771 points, with major indices mixed, while the top 40 was down 0.43.
At 6pm, the Dow Jones industrial average was 0.9% firmer at 44,387.06 points. Markets in Europe were firmer.
In the commodities markets, gold fell 2.54% to $2,615.74/oz and platinum 0.19% to $967.2/oz. Brent crude tumbled 3.03% to $71.63 a barrel.
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