Rand slips 1% against the dollar as caution prevails ahead of G-7 meeting

The rand was weaker against major global currencies on Thursday afternoon, with losses exceeding those of its emerging-market peers, as investors waited for the Group of Seven (G-7) summit in Canada to get under way.

The local currency pared losses by about 5c earlier after Statistics SA released upbeat manufacturing data for April. These gains were short lived, however, and by the late afternoon the local unit was 1% weaker against the euro and at a two-week low against the dollar.

Recent receding political concerns have boosted the euro, pressured the dollar and taken some of the strain off the rand. The local unit had been on the back foot after the shock of local GDP figures on Tuesday.

The domestic economy contracted 2.2% in the first quarter, prompting a selloff in local assets, which reflected in the weaker currency and higher bond yields.

Following the GDP numbers, data releases would be closely watched, said TreasuryOne senior currency dealer Andre Botha. A negative number would be likely to yield a more dramatic reaction by the market, he said.

Analysts said markets would likely be cautious ahead of Friday, where a closely-watched G-7 meeting will begin.

Issues of global trade conflict were set to dominate the agenda, with reports suggesting many countries would opt not to sign a joint declaration at the summit should US President Donald Trump fail to give ground on recent trade demands.

The Turkish lira on Thursday was the best performing emerging-market currency, gaining some 2% against the dollar after that country’s central bank raised interest rates 100 basis points.

Local bonds were weaker in line with the rand, with the yield the benchmark R186 bond holding at 8.74% from 8.66%, while the R207 was bid at 7.45% from 7.4%.

At 3.02pm, the rand was at R12.8576 to the dollar from R12.7118, R15.2182 to the euro from R14.9696, and R17.2489 to the pound from R17.0532. The euro was at $1.1835 from $1.1775.