Rand remains volatile as stocks recover

CAPE TOWN – The rand’s volatility continued with the domestic currency trading in a range of R14.32 to R14.64, with no local data influence but jobs data from the US. 

TreasuryONE senior currency dealer Andre Botha described the rand’s recent reaction as strange compared with other emerging market peers. 

“We have seen the main driver of emerging markets weakness over the past week, Turkey, gaining significant ground against the US dollar but none of that spilt over to South Africa. In fact, the rand lost a fair amount of ground trading at R14.74 on Wednesday afternoon,” he said. 

Botha cited Moody’s as one of the reasons for the currency’s odd reaction. 

“The other local factor was the speculation about how land redistribution will work by Gwede Mantashe. Whether this is feasible is another story, but with uncertainty still regarding the issue, the land issue will remain in the mind of the market for the foreseeable future.” 

At 5pm the domestic currency was bid 5c weaker than Friday’s same time bid at R14.62 a dollar. Against the pound sterling the rand was 10c softer at R18.61 and to the euro, the currency eased 13c to R16.66. 

Peregrine Treasury Solutions corporate treasury manager Bianca Botes said the rand remained steeply oversold and the slide on Wednesday came as quite a surprise to most market participants. 

“The broad-based emerging market sell-off continues, causing a currency bloodbath in its wake, with the Mexican peso, Russian rouble, and South African rand being among the victims. 

“The market’s main concern is that Turkey is only one cog in a broken machine as all emerging markets are exposed to high levels of US and European debt, following the cheap lending of quantitative easing. Now that interest rates are on the rise, these borrowings are not so cheap anymore,” she said. 

Botes said local factors were also adding to the rand’s woes as June retail sales came in significantly lower than expected at 0.7 percent and Eskom locked horns with trade unions once again.” 

JSE recovered from Wednesday’s Naspers-led rout with the blue-chip Top40 index scoring 1.8 percent gains to 50 506.38 points, while the broader all share index inched up 1.65 percent to 56 562.34 points. 

Leading gains among major movers were Exxaro, which gained 7.99 percent to R140, followed by African Rainbow Minerals which ticked up 4.64 percent to R116.48. South32 added 3.98 percent to R35.77, while Sanlam grew 3.74 percent to R74.66 and Vodacom closed 3.31 percent higher at R127.66.

The biggest losers were Tigerbrands, which tanked 8.94 percent to R298.33 followed by Pioneer Foods which declined 5.01 percent to R105. 

Curro lost 3.72 percent to R31.10, while Distell dropped 3.1 percent to R120.16 and KAP gave up 2.03 percent to end the day at R7.25.