Rand retreats, dragged by local factors

Rand retreats, dragged by local factors


The rand was heading towards its first weekly decline in four weeks as supply-side challenges – power generation – and an unfolding third wave of Covid-19 infections outweighed reprieve offered by better-than-expected GDP figures, according to NKC Research.

With regard to the broader backdrop, we maintain our dollar bearish stance but recognise that the window for the US currency to weaken substantially has shortened amid the sideways price action over Q2.

Even so, global industrial activity is likely to stay strong through H2, presenting scope for the greenback to break lower. The broad nominal dollar is close to the lows in early 2018 and it’s evident that there is technical support around these levels.

A more macro-based support is FX-strength aversion in major blocs such as the euro area and China, with the expectation that the Fed will pivot towards policy normalisation sooner.

At the close of local trade, the rand quoted 0.72 percent weaker at R13.68/$, after trading in range of R13.53/$ to R13.70/$.

South African bourse

The JSE All Share (+0.27 percent) ended in positive territory on Friday, thanks to gains in large resources (+1.12 percent) stocks. In the overall emerging market (EM) sphere, the MSCI Emerging Market Index (0.23 percent) traded slightly higher. EM equities are often seen as a relative inflation hedge, particularly when inflation is driven by rising commodity prices. However, this is less likely to be the case these days as EM equities are no longer a pure play on the commodity cycle in aggregate.

Brent crude oil

The Brent oil price rose to a fresh multiyear high at the end of last week – banking its third straight weekly gain – thanks to rising vaccination rates across the globe and an improved outlook for fuel demand. At the close of local trade, benchmark Brent crude futures quoted 0.47 percent higher at $72.77pb.


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