Rand breaks past R13.50/$ as global markets welcome Fed’s policy signals

The JSE faces mixed Asian markets on Thursday morning, but the rand was trading at its best level to the dollar in about 26 months, boosted overnight by comments from a US Federal Reserve official.

The rand jumped 1.73% against the dollar in overnight trade on Wednesday, its best performance in three months, with the local currency dipping below R13.50/$ on Thursday for the first time since February 2019.

Sasfin Wealth fixed-income analyst Alvin Chawasema said in a note that emerging-market currencies had benefited from comments that the Fed would consider slowly moving back on bond purchases in a way that would avoid a “taper tantrum.”

This refers to a sharp reaction in 2013 to a Fed announcement that it would pull back on bond purchases, which created volatility in global markets. Rising inflation and the prospects of less favourable monetary conditions in the future have been key trading themes in 2021.

Some headlines attributed the rand’s emerging-market outperformance to lack of support for the section 25 constitutional amendment, said Chawasema, referring to the fact that SA’s political parties have still not agreed on amendments to the constitution to explicitly allow for expropriation of land without compensation.

“However, it does appear as though global flow factors are more influential,” Chawasema added.

Global markets were mixed on Thursday morning, with trade expected to be cautious ahead of the release of US nonfarm payrolls data on Friday. This is a key gauge of the health of the US labour market, and will be scrutinised for clues regarding future Fed policy.

In morning trade, the Hang Seng was down 0.4%, while the Shanghai Composite had added 0.38%, and Japan’s Nikkei 0.39%.

Tencent, which can give direction to the local market via the Naspers stable, had fallen 0.95%.

Gold was 0.22% lower at $1,903.92/oz, while platinum had risen 0.2% to $1,191.37. Brent crude was 0.72% higher at $71.72 a barrel.

The rand was flat at R13.51/$, having earlier touched R13.499/$.

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