Rand loses ground as Turkish lira’s rally fades in volatile trade

The rand was weaker against global major currencies on Monday afternoon after the Turkish lira lost the initial gains made following the re-election of Recep Tayyip Erdogan, for another five-year term, as president of Turkey.

Erdogan got nearly 53% of the vote with almost all votes counted, with his closest rival coming in at 31%, leading to an initial 3% rally in the country’s currency.

The lira was at 4.6934 to the dollar from 4.6342 earlier on Monday afternoon, as analysts expressed concern the lira might hit the five to the dollar level should Erdogan initiate further market-unfriendly policies. That would be negative for emerging-market currencies, including the rand.

“We still needed to see whether Erdogan will pursue his stance on having more control of monetary policy in Turkey,” TreasuryOne analyst Andre Botha said. Should this be the case, the earlier positive sentiment toward emerging-market currencies could turn around swiftly.

The rand has been caught up in the crossfire of a trade war, predominantly between the US and China, leaving many wondering about its potential effect on the global economy.

It found little support from a slightly firmer euro, as the common currency shrugged off weaker data from Germany. The June, Germany’s Ifo business climate index edged down 0.5 points to 101.8, in line with forecasts.

US President Donald Trump has threatened to slap tariffs on automotive imports from the EU, which is bound to hit that sector of Germany’s manufacturing industry.

“A possible moderation in global trade, due to US-led trade protectionism, will likely be a significant headwind to German growth,” Barclays Research analysts said.

At 3pm the rand was at R13.5702 to the dollar from R13.4209, R15.8513 to the euro from R15.6603 and R18.011 to the pound from R17.7954. The euro was at $1.1681 from $1.1666.

Local bonds edged weaker on the rand, while US treasury yields were flat, at 2.8934%.

The benchmark R186 government bond was last bid at 8.885% from 8.87% and the R207 at 7.6% from 7.545%. The R186 yield rose to a high of 9.23% early last week, before recovering to below 9% on Thursday and Friday.