Rand on the back foot as global tension casts shadow on emerging markets

The rand was about 0.8% weaker against the dollar on Monday afternoon as the latter clawed back some lost ground against the euro.

The dollar lost traction at the end of last week following US President Donald Trump’s criticism of the US Federal Reserve’s rate-increasing cycle.

Optimists in the market had hoped that the weaker dollar would support higher-yielding currencies such as the rand, but the Group of 20 (G-20) meeting among finance ministers and central bank governors at the weekend in Argentina, highlighted the risks of further trade tension undermining the global economy.

Earlier, Trump intimated the US would impose additional tariffs on a further $500bn of Chinese imports.

There was still an air of uncertainty amid continuing trade tension, especially following Trump’s comments late last week that he could impose further tariffs on China, said FXTM analyst Jameel Ahmad. “The social media tweet early this morning directed at Iran, is likely to cause further pressure on global markets.”

Trump warned the country it would “suffer consequences the likes of which few have ever suffered before”. He was referring to a speech by Iranian leader Hassan Rouhani, in which he referred to relations with the US.

Eskom’s results also provided some headwinds for the local currency, with the company’s total debt burden of R360bn presenting a risk to the rest of the economy.

Eskom reported an annual net loss of R2.3bn, compared with 2017’s profit of R900m. Net finance costs grew 61% to R23bn with irregular expenditure coming in at R19.6bn.

At 3pm the rand was at R13.5202 to the dollar from R13.4147, R15.8432 to the euro from R15.7328 and at R17.7549 to the pound from R17.6073. The euro was at $1.1717 from $1.1728.

Local bonds tracked the weaker rand, with the benchmark R186 10-year government bond last bid at 8.76% from 8.715%, with the R207 at 7.455% from 7.435%.

The benchmark US 10-year treasury was last seen at 2.9038% from 2.8964%.