US elections: This is how a second term for Trump could impact SA
Durban – If Donald Trump is voted in for a second term, it could mean ongoing trade tension with China and more uncertainty for emerging markets. This is according to Lukman Otunuga, senior research analyst at FXTM.
Lukman said if trade tensions negatively impact the second-largest economy in the world, the pain could find its way into many economies that have close trade ties, including South Africa.
"The dollar may end up appreciating on this outcome, which could hit emerging markets with high dollar-denominated debt," he said.
Lukman was responding to questions from IOL on how the US elections affected matters in South Africa.
"The US elections and impacts it may have on the dollar remains a significant risk to emerging markets including South Africa. Pre-election jitters could fuel risk aversion, consequently drawing investors away from riskier assets to safe-haven destinations like the dollar.
’’An appreciating dollar could enforce further pressure on the rand, which has depreciated almost 20% year-to-date against the dollar," Lukman added.
With regards to trade, he said that ties between the two countries have improved under the African Growth Opportunity Act.
"This allows African countries to export duty-free to the US. However, given the current developments across the globe and ever-changing landscape, the future of this act remains uncertain," he said.
Lukman said that a Biden presidency would equally impact South Africa.
"A Biden win may raise hopes of decreased protectionism and improving trade relations with China. Such a positive development could bolster global risk sentiment, consequently boosting appetite for emerging-market assets.
’’The dollar is seen weakening in such an environment, which will be warmly received by EM (emerging market) currencies. If healthy trade relations between the world’s two largest economies results in rising global growth, everyone is set to benefit," he said.
Earlier on Wednesday, Reuters reported that more than 70 million people have cast early in-person and mail ballots, according to data compiled by the US Elections Project at the University of Florida. That is a record-setting pace and more than half of the total 2016 turnout.
The US elections are set to take place on November 3.