Rand and bonds strengthen as protectionist fears ebb

The rand was firmer against major global currencies on Tuesday afternoon, as volatility subsided along with market concern over the implications of the US-China trade conflict.

On Monday, US officials moved to reassure the market that a list of investment restrictions to be published later this week would be less severe than markets expected.

Investors seemingly took the opportunity to buy at lower prices after the recent sell-off of emerging-market assets, with most of the rand’s peers firmer on the day.

Analysts were, however, circumspect, saying the market continued to price in slower economic growth as a result of tit-for-tat tariff action between the US and its trading partners.

Risk aversion remained the foremost issue for the market, and the dollar looked set to continue to be one of the biggest beneficiaries of the safe-haven shift by investors, Oanda analyst Craig Erlam said.

As of Tuesday afternoon, the rand had lost 9.45% against the dollar in 2018, compared to losses of 22.36% and 45.68% for the Turkish lira and Argentinian peso, respectively.

Local data again took the back seat on the day, with Statistics SA saying earlier that employers added 56,000 staff to their payrolls in the first quarter, a 0.8% increase year on year.

“Given just how poorly the manufacturing and construction sectors have performed, we are sceptical that the job gains in these two industries can be sustained,” said FNB senior economic analyst Jason Muscat.

At 3pm, the rand was at R13.5059 to the dollar from R13.5499, R15.7636 to the euro from R15.8550 and R17.8882 to the pound from R17.9966. The euro was at $1.1671 from $1.1702.

South African bonds tracked the firmer rand, with the benchmark R186 last bid at 8.87% from 8.9%, while the R207 was at 7.585% from 7.595%.