Compiled by Dhivana Rajgopaul
JOHANNESBURG - An uptick in business optimism and thawing risk aversion caused the rand to strengthen yesterday according to NKC Research.
Safe-haven assets retreated as risk appetite resumed, lifting global equities and commodities. We remain constructive on risk-sensitive commodity-linked currencies despite short-term risks to sentiment posed by US political risk and simmering US-Sino trade tensions. Our base view is for ongoing rotation out of defensive positions and a softening dollar narrative. The Fed’s shift to average-inflation targeting implies a high probability that, once inflation is factored in, advanced economy government bonds are likely to provide negative returns over the next five years.
At the close of local trade, the rand quoted 1.89 percent stronger at R16.62/$, after trading in range of R16.62/$ - R17.01/$. The rand traded steady overnight. Expected range today R16.55/$ - R16.90/$
Business sentiment improves slightly in Q3
The RMB/BER Business Confidence Index (BCI) rebounded from an all-time low of 5 in 2020 Q2 to 24 in Q3. Despite the increase, sentiment remains depressed, and the latest figures suggest that around three out of four executives still consider prevailing business conditions to be unsatisfactory.
Confidence in the wholesale sector saw the biggest rebound, rising from 4 points to 33 in Q3. Retail confidence also rose markedly, increasing 25 points to reach 36 in Q3 – the strongest reading among the five sectors surveyed. Confidence in the manufacturing sector saw a more modest improvement, increasing from 6 to 22, while motor dealer confidence came in at 16 points in Q3, up from Q2.
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