Pressure mounts on weaker rand ahead of Moody's decision
DURBAN – The rand gave up its recent gains as it continued to be haunted by the rather uninspiring Medium-term Budget Policy Statement (MTBPS) delivered by the Finance Minister Tito Mboweni on Wednesday.
The domestic currency ranged between R14.97 and R15.19 to the dollar on Thursday.
At 5pm the domestic currency was bid 5c weaker than the same time bid on Wednesday at R15.10 against the dollar. Against the pound, it was 16c weaker at R19.52 and bid at R16.81 versus the euro.
Treasury Partner at Peregrine Treasury Solutions Bianca Botes said the rand was now off 3.75 percent from Wednesday opening. She said that the rand had come under pressure on Wednesday, weakening as much as 2.5 percent against the greenback and breaching R15.00/$.
She said the MTBPS offered little clarity on the reforms South Africans could expect in the 2020 budget. According to her, the increasing state debt burden and growth adjustment saw the rand wipe out all of its recent gains while the 25 bp Fed interest rate cut also did little to appease the market.
“The rand weakened further late on Thursday morning as China stated that it is doubtful that a deal with the US can be reached," said Botes.
Nedbank CIB research analyst Reezwana Sumad said that the local session got underway with the rand trading in the low 14.60s on Wednesday.
“The foreign exchange markets traded cautiously ahead of the MTBPS. Once its disappointing details became known, the rand traded rapidly weaker to reach a high of R15.07 on the day, closing the local session trading marginally sub-R15. After the time of the local close, the FOMC cut rates, but signalled a halt to the cutting cycle, and this saw the rand reach a high around the R15.12 level,” said Sumad.
Sumad said the MTBPS disappointed across the board as underperforming state-owned entities continued to drain resources as they have for a while, with little apparent prospect of a change in the status quo. “This saw the rand trade rapidly weaker as the markets expressed their views. The rand has now retraced all its recent gains and trades firmly on the back foot.”
Meanwhile, JSE stocks rose with the blue-chip Top40 index lifting 1.09 percent to 50168.48 points while the broader all share index also increased 0.99 percent to 56 425.11 points.
The biggest earners were AngloGold which gained 7.37 percent at R330.39 followed by Goldfields with 5.70 percent at R92.94 then Harmony with 4.54 percent to R52.29. Bidcorp increased by 4.20 percent at R352.51 while Sibanye lifted 4.11 percent to R29.15.
The biggest losers were Sasol which shed 4.50 percent to R274.27 followed by Exxarro dropping 2.75 percent to R123.31 while Fortressa decreased by 2.64 percent to R21.01. South32 lost 2.34 percent at R26.28 and African Rainbow Minerals losing 1.81 percent to R151.20.