Rand slips against major currencies in risk-off trade

The rand was slightly weaker against major global currencies on Monday afternoon, with world markets generally lower after trade tension ratcheted up at the weekend.

The decision by the US to impose $50bn in additional tariffs on Chinese goods has taken the shine off riskier assets, with a number of forthcoming events also set to ensure the local currency will struggle to push higher.

The announcement by the White House prompted an immediate reaction from China, which announced the implementation of tariffs of 25% on about 700 US products.

Political developments in Germany, where Chancellor Angela Merkel is under siege for her stance on migration, were also weighing on markets.

The rand may also face headwinds from the upcoming election in Turkey, as volatility over coming days may not be limited to the Turkish lira, said FXTM global head of currency strategy Jameel Ahmad. Should that currency nosedive, it would be likely to reduce investor appetite towards emerging markets in general.

Locally, focus remains on Eskom where a wage dispute is continuing. In terms of data, consumer inflation numbers on Wednesday will be closely watched, with economic consensus that headline inflation accelerated slightly in May to 4.6% year on year, from 4.5% in April.

Current-account data on Thursday will cap what is generally a light week in terms of data.

Local bonds were slightly weaker in line with the rand on Monday afternoon, with investors likely to be eyeing Eskom’s load-shedding schedule due the possible effect on economic growth, said Rand Merchant Bank bond analyst Michelle Wohlberg.

At 3pm, the rand was at R13.4914 to the dollar from R13.4223, R15.6582 to the euro from R15.5601 and R17.8643 to the pound from R17.7956. The euro was at $1.1606 from $1.1588.

The benchmark R186 was bid at 9.025% from 9.01% while the R207 was at 7.695% from 7.68%.