A well-received Sona will help the rand in the short term whereas a badly received address will see it on the back foot heading to the budget speech. File Photo: IOL

CAPE TOWN – The rand has been under pressure after opening at R13.54 to the dollar on Thursday and weakening to R13.64 as the spotlight falls on President Cyril Ramaphosa’s second State of the Nation Address (SONA).

This after the domestic currency weakened during the overnight session, bringing many of the South African issues back into focus ahead of the last SONA of the fifth democratic Parliament.

Peregrine Treasury Solutions corporate treasury manager Bianca Botes said market participants would be keeping a close eye on the president’s statement, “looking for solutions relating to Eskom and youth employment in particular. Disruptions by opposition parties are a possibility again, with the EFF already threatening to do so”.

“Wednesday’s State of the Union Address by Donald Trump was largely ignored by market participants as no concrete commitments were made, which saw the dollar rally to its strongest levels in two weeks, adding to the rand woes,” said Botes.

Depressed local sentiment was further reflected in a Reuters poll, which showed that the rand was set to lose half of the 7 percent gain made against the dollar since the start of 2019, over the next 12 months, according to NKC Research.

TreasuryONE senior currency dealer Andre Botha noted that the emerging markets push from the past couple of weeks seemed to have run out of puff. 

“We have seen the dollar stronger this morning on the back of a weaker euro as the growing numbers of some countries in the single currency bloc have been disappointing, to say the least.

“Tonight we have the SONA speech by President Ramaphosa, and we expect that the rand direction at least in the short term will be affected by the address,” said Botha. 

He said the basic equation was simple: “A well-received SONA will help the rand in the short term whereas a badly received address will see the rand on the back foot heading to the budget speech on February 20.”

FXTM chief market strategist Hussein Sayed said Ramaphosa’s SONA might offer investors a rare opportunity to gain fresh insight into the health of the South African economy and future strategies to promote economic growth. 

“Buying sentiment towards the rand will be heavily influenced by the tone Ramaphosa adopts during the SONA. With the local economic calendar void of any top-tier reports ahead of the speech this evening, the rand will most likely be driven by the dollar’s performance,” said Sayed. 

The domestic currency was trading at R13.61 at 4:45pm.