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Home / News / Financial / SA's rand spikes amid renewed trade war fears and Nene comments

SA'S RAND SPIKES AMID RENEWED TRADE WAR FEARS AND NENE COMMENTS

Date: 2018-04-09


SA

SA


Economists are puzzled at the rand's weakening of over 1% to the US dollar just after noon on Monday It's been suggested by one that the spike is a knee-jerk reaction to comments made by Finance Minister, Nhlanhla Nene, on Monday morning.

By 12:53 the local unit was trading 0.85% weaker at R12.13, after hitting an intraday low of R12.15/$.

It's been reported that Isaah Mhlanga, an economist for RMB said one possible reason for the rand's sudden move to R12.15 was "an irrational reaction" to statements made by Nene.

At a seminar in Johannesburg on Monday, Nene told city managers that "South African municipalities need to be pulled back from the brink of financial ruin," and that some South African cities are "on the brink of collapse" and "can’t be allowed to fail".

Gerrit van Rooyen, NKC African Economics economist, said "disappointing eurozone investor confidence data and renewed trade war fears for the rand's decline" were to blame.

on Sunday, US President, Donald Trump, tweeted that he expects China would "take down its trade barriers" which eased some trade war concerns.

According to News24, Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions, said good data coming out of the US was driving dollar strength.

On the other hand, emerging currencies are depreciating as a consequence of expectations of conflict between the US and North Korea, as well as trade tariff disputes between the US, China and the EU, which are resulting in a selloff of emerging-market assets.

She said, "The rand has been expected to weaken to closer to fundamental levels and the current pace that we are seeing stems from the 'risk-off' environment. Investors are positioning themselves to have liquidity, as well as a safer haven, compared to South Africa and other emerging markets at the moment."

The 1% hike in the VAT and the slightly weaker rand saw the Business Confidence Index decline with inflation expected to rise.

"There thus are certain structural elements that are putting pressure on the rand – overall on both the political and economic fronts the country has been quiet and we are still lagging the rest of the world in terms of an economic uptick – but mostly, the rand weakness being driven by a global selloff of emerging market assets," Botes concluded.


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