JOHANNESBURG – The rand on Monday strengthened nearly 1 percent against the dollar on lessened likelihood of a downgrade and news that the trade negotiations between the US and China had made significant progress in brokering a deal.
The rand rose to R13.8290 by 5pm against the greenback from the R14.05 it was bid at on Friday as the market priced-in lessened worries about the country’s public finances following last week’s Budget.
Moody’s, which ranks the country’s investment grade a notch above junk, is expected to give its review next month.
Investec chief economist Annabel Bishop said as pre-Budget jitters had been wiped out by deeper analysis showing the government’s finance figures do not argue for an immediate credit rating downgrade.
“With the domestic currency reaching R13.85 against the dollar, R15.72 against the euro and R18.12 against the pound today (Monday), it is approaching levels of pre-Budget 2019 jitters, with possibly some room for further strength in the near-term on supportive global factors,” Bishop said.
“However, at the end of March, it risks weakness as a Moody’s credit rating downgrade could occur, instead of merely a drop in the outlook.”
The rand also rallied after US President Donald Trump on Sunday tweeted that the watershed trade talks had been “very productive”, and that he would delay an increase in tariffs on Chinese goods planned for March 1.
Andre Botha, senior currency dealer at TreasuryONE, said the optimism from both sides has sent stock markets soaring, which normally indicated a period of risky assets being the flavour of the week.
“This bodes well for the rand at the start of the week, and with limited data out this week, we expect the rand to stay relatively range bound.
“However, a change in emerging-markets sentiment is only one headline or tweet away,” Botha said.
The local bourse was also on the front foot in yesterday’s trade session with the all share index closing the session 0.14 percent up, while the blue-chip Top 40 index was up 0.21 percent.
Banking stocks closed the session higher, with Absa and Capitec doing the heavy lifting.
The tariff fight between the world’s two biggest economies had hurt financial markets and dented economic activity worldwide.
Washington and Beijing are now said to be planning a summit between Trump and Chinese counterpart Xi Jinping to conclude an agreement.
Jameel Ahmad, an analyst at FXTM, said a number of emerging-market currencies across the globe have strengthened against the dollar.
“The suggestion from President Trump that he is planning for a summit for President Xi and himself will also raise investor excitement that a resolution to this long-standing trade conflict is nearing a conclusion,” Ahmad said.