US President Donald Trump delivers his first State of the Union address.
JOHANNESBURG - The Steel and aluminium wars started by US President Donald Trump this week spooked the rand and clawed back gains made by the currency after Statistics SA on Tuesday revealed that the country’s gross domestic product (GDP) for the fourth quarter had risen beyond market expectations.

The rand went on a downward spiral against the dollar, falling to R11.90, on Thursday as trade war fears continued to grip the world.

But by 5pm on Friday, the rand had recovered to R11.81.

The rand’s weakness mirrored that of other emerging currencies as uncertainty persisted over proposed US import tariffs despite buoyant Chinese trade data for February, which usually supports emerging market sentiment.

Trump on Thursday pressed on with imposing tariffs on metal imports despite criticism and fears of a trade war.

Analysts from Merchant West said in a note that offshore event risk now loomed large to dictate sentiment and directionality of the local currency.

“While rand sentiment and resilience indicators are still pointing constructively for the medium-term outlook, for now, it still looks like the market is uncomfortable, trading outside the pre-Zuma resignation range that extends back up to R12.20 against the dollar,” Merchant West said.

The threat of a trade war has seen investors dumping risk assets in general, with emerging market equities falling indiscriminately.

Commodities exporters were hardest hit, with Exxaro bleeding 11.85percent of its share price on Friday to close at R107 from R131 on Tuesday.

Kumba Iron Ore fell 0.62percent at R320.50 from R350, while Royal Bafokeng Platinum slumped 4.83percent to R27.22 from R26.26 and African Rainbow Minerals eased 4.02percent to R107.56 from R115 on Tuesday.

Investec said it expected the local currency to trade in a range of R11.42 to R12.42 against the dollar, R14.19 to R15.19 against the euro and R15.96 to R16.96 against the pound.

Lara Hodes, an economist at Investec, said the rand remained still one of the best performing emerging market currencies, year to date, out of a basket of 24 currencies.

“Rand movements during the week were influenced by the weakening dollar, which was driven by fears over President Trump’s protectionist trade policy stance.

“On its own, the rand is seen to have appreciated on stronger-than-expected domestic GDP figures,” said Hodes.

She added that the next tests for the currency would be Moody’s review of the country’s credit rating next week and the tone of the SA Reserve Bank’s Monetary Policy Committee (MPC) later this month.