The rand weakened for a second straight day on Tuesday, with the JSE closing a short trading day firmer.
The local currency lost as much as 1.6% in the previous session, touching its weakest level since August.
TreasuryONE currency strategist Andre Cilliers said volumes were thin due to the upcoming holidays and the light trade could see the currency undergo some exaggerated moves.
“Despite the recent extension of the African Growth and Opportunity Act (Agoa), sentiment towards the rand remains weighed down by [electricity] grid limitations and fiscal risk,” said Cilliers.
“Globally, the rising US Treasury yields and reduced expectations for Federal Reserve rate cuts have bolstered the dollar, putting pressure on emerging market currencies like the rand,” he said.
He added that the trend was likely to continue in the short term, with the rand potentially breaching the R18.6650/$ resistance level and targeting R18.75/$.
At 3.21pm, it had weakened 0.43% to R18.59/$, 0.35% to R23.36/£ and 0.39% to R19.35/€. The euro was 0.1% weaker at $1.04.
Business Day reported on Monday that SA had secured its Agoa benefits for another year, allowing duty-free access for certain products exported to the US.
Agoa requires US legislators to conduct annual eligibility reviews of beneficiaries. For SA, retaining its status as a beneficiary is crucial as the preferential access extends to about 20% of the country’s exports to the US, or 2% of its shipments globally.
Cilliers cautioned however that the future of Agoa under the Donald Trump administration remained uncertain, with eligibility reviews likely to involve stricter geopolitical considerations.
“US fiscal policies, including tax reforms, trade renegotiations, and government downsizing, are expected to reshape global economic trends leading to increased volatility,” said Cilliers.
In the medium term, he said the SA Reserve Bank’s cautious stance was expected to support carry trade prospects for the rand. However, sustaining the rand’s stability in 2025 would require fiscal reforms and strategic investments in energy infrastructure.
“SA’s constrained grid infrastructure remains a bottleneck for renewable energy growth.”
The JSE closed at noon on Tuesday and will re-open on Friday for a full day’s trade.
The all share gained 0.26% to 84,935 points and the top 40 0.33%. Precious metals rose 1.6%, resources 1.25%, industrial metals 0.94%, retailers 0.25% and financials and banks 0.16%. Industrials were flat while food producers lost 0.49% and SA listed property 0.47%.
Gold was flat at $2,612.21/oz, with platinum little changed at $944.23. Brent crude added 0.3% to $73.21 a barrel.
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