MARKET WRAP: Rand and JSE weaker after volatile week

The rand weakened to a three-week low on Friday, while the JSE closed little changed on the day, but almost 2,800 points below levels of a week ago. The local bourse was in line with weaker global peers as investors assessed the more hawkish tone of the world’s central banks.

From firming to R15.2 against the dollar ahead of the SA Reserve Bank’s monetary policy committee meeting interest rates announcement on Thursday, the rand ended that day 0.93% weaker after the MPC increased its benchmark repo rate by 25 basis points to 4%. 

Though the move was widely expected, it was the cautious tone struck by the MPC regarding the balancing of rate hikes versus economic conditions that caused the market to “interpret it as a little more dovish than expected, and the rand lost a little bit of ground,” said TreasuryONE currency strategist Andre Cilliers.

“However, the MPC meeting also coincided with a stronger US dollar which caused emerging-market currencies to lose some ground” added Cilliers. 

At 5.22pm on Friday, the rand had weakened 1.45% to R15.6787/$, 1.49% to R17.4799/€ and 1.68% to R21.0315/£. The euro was little changed at $1.1146.

It has been a turbulent week triggered by the Federal Reserve’s pivot towards tighter monetary policy. The Fed struck what was seen by many as a hawkish tone, leading markets to partially price in five interest rate increases for the world’s largest economy in 2022.

“Market volatility is not going away any time soon, and many traders are still processing what happened on Wednesday. Investors are betting on higher borrowing costs, with markets now expecting almost five interest-rate increases from the Fed this year.” said Oanda senior market analyst Edward Moya.

“Investors are also speculating whether Fed chair Jerome Powell will front-load hikes by potentially making a rare 50-basis-point move in March, after he struck a hawkish tone at this week’s meeting,” added Moya. “The rollercoaster ride is not over yet.” 

The JSE all share and the top 40 were little changed on Friday, with the former at 73,455 points. Banks gained 1.17%, financials 0.94% and industrials 0.54%. The precious metals and mining index fell 3.13%, resources 1.35% and industrial metals 0.91%.

At 5.35pm, the Dow Jones Industrial Average was 0.61% weaker at 33,951 points. London’s FTSE 100 fell 1.31%, France’s CAC 40 1.58% and Germany’s DAX 1.82%. 

Gold was down 0.68% to $1,785.01/oz, while platinum fell 2.58% to $1,001.50. Brent crude was 1.22% higher at $91.12 a barrel.

[email protected]