Rand remains on its losing streak as local politics keeps it under pressure

The rand remained under pressure on Friday morning against major currencies, reaching its weakest level in eight months against the US dollar, driven by the ANC’s conflicting statements on the mandate of the Reserve Bank and a week of poor economic data.

The local currency has lost about 3.5% since Monday and broke through R15/$ against the dollar amid the uncertainty about the ruling party’s stance on the Reserve Bank.

On Tuesday, ANC secretary-general Ace Magashule said the party wanted to expand the mandate of the central bank to include job creation and explore the use of quantitative easing. President Cyril Ramaphosa and finance minister Tito Mboweni spoke out, saying the central bank’s mandate will not be altered. 

At 9.15am, the rand had weakened 0.62% to R15.0932/$, 0.55% to R17.0053/€ and 0.71% to R19.1748/£. The euro was little changed at $1.1267. 

The benchmark R186 government bond had weakened, with its yield rising 7.5 points to 8.535%. Bond yields move inversely to bond prices.

Gold had fallen 0.15% to $1,333.43/oz and platinum was up 0.37% to $804.47.

Brent crude had gained 0.71% to $62.68 a barrel. 

“While all emerging markets remain under pressure, the rand is certainly bearing the biggest brunt, underlining that the weakness witnessed over the past two to three days has been mostly driven by local politics,” said Bianca Botes, treasury partner at Peregrine Treasury Solutions.

Earlier this week, worse-than-expected economic data put pressure on the rand. First-quarter GDP contracted 3.2%, IHS Markit purchasing managers index fell to 49.3 points in May from 50.3 in April and the SA Chamber of Commerce and Industry business confidence index declined to 93.0 points in May from 93.7 in April.   

The Reserve Bank is expected to release data on gold and foreign exchange reserves, and statements of assets and liabilities later in the day.

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