The rand has capped its longest run of gains against the dollar in 18 months as global stocks rallied, with fresh stimulus measures by the European Central Bank (ECB), helping cement the gains as investors sought higher-yielding investments.
By the JSE’s close on Friday, the rand had gained about 5.8% against the dollar in the past month, after four consecutive weeks of gains, its best run since February 2018, according to Bloomberg data.
A cooling of trade tension between the US and China has improved risk sentiment in global markets, while the ECB’s 10-basis-point cut, to -0.5%, together with its announced €20bn a month quantitative easing from November 1, boosted sentiment further.
Standard Bank trader Warrick Butler said the market had been waiting for the ECB to deliver, which it did in no uncertain terms, “so much so that they have pretty much given the market forward guidance for the next three years with seemingly open-ended intervention through asset purchases … suffice to say that the euro can now be classified as the funding currency du jour”.
Lower interest rates in the eurozone provide additional room for the SA Reserve Bank to cut rates, through the benefit afforded to the rand. When developed markets cut interest rates, interest in SA bonds rises due to the higher yields they offer.
“The continued lower yields in developed countries only entices more investment into emerging-market, high-yielding assets,” Butler said.
US President Donald Trump said on Thursday that the US and China had agreed to postpone the 25%-30% tariff on $250bn worth of the latter’s imports. Trump said the imposition of the tariffs would be moved from October 1 to October 15 as a “gesture of good will”. On Wednesday, China exempted 16 US products from additional tariffs, a move it affirmed early on Friday.
At 5.19pm on Friday, the rand had gained 0.51% to $14.5189/$ and 0.38% to R16.0784/€; it was, however, 0.5% weaker at R18.0853/£. The euro had firmed 0.09% to $1.1074.
Gold lost 0.3% to $1,494.54/oz and platinum 0.29% to $953.14. Brent crude was 0.33% lower at $60.19 a barrel.
The JSE also capped a good week, with the all share now up 8.32% for 2019. It lost just more than 11% in 2018.
The all share ended the day up 0.6% to 57,123.8 points while the top 40 tacked on 0.74%. Banks were up 1.89% and financials 1.65%. In the improved risk-on environment, the gold index plunged 8.76%, its biggest one-day fall in exactly a month. Resources rose 1.04%, with the larger diversified miners doing particularly well.
Glencore leapt 3.74% to R47.17, Anglo American 3.7% to R358.64, and BHP 2.84% to R331.96.
Absa led the gains among the big-four banks, up 3.05% to R167, with Nedbank rising 2.1% to R238.54, FirstRand 1.89% to R64.77, and Standard 1.45% to R187.78.
AngloGold Ashanti slumped 8.38% to R279.25, Gold Fields 7.96% to R68.30, Sibanye-Stillwater 7.93% to R16.61, and Harmony 9.19% to R44.19.
AfroCentric was down 2.94% to R3.30, despite earlier reporting a 1.6% rise in headline earnings to R265.2m in the year to end-June.