Rand stabilises after nervous start in Asian session

The rand turned positive in midmorning on Wednesday after a shaky start in the Asian session, highlighting the fluidity of the global markets.

The local currency has had a rollercoaster ride since at least Friday, crossing R15 to the dollar for the first time in two years at one stage, raising inflation concerns

It has since recovered substantially from those low levels, which some analysts considered to be overdone and unjustifiable.

“Manic Monday’s sell-off in emerging markets created an ideal buying opportunity on Tuesday, as fears regarding a continued emerging-markets sell-off started to dissipate,” Rand Merchant Bank analyst Michelle Wohlberg said in a note.

“This resulted in a very strong South African government bond auction. … Both local and foreign investors were reported as net buyers on the day, as emerging markets recouped some of their losses.”

However, on Wednesday morning, the rand was caught up in the two conflicting scenarios: the stabilising lira on one hand and the strengthening dollar on the other.

The greenback has benefited from several factors, including robust US economic growth, which allowed the US Federal Reserve to raise interest rates.

The stronger greenback also hurt commodity prices, including platinum that dropped to its weakest levels since the 2008 global financial crises.

The price of platinum, which is used to curb harmful emissions in vehicles and jewellery, fell nearly 2% to $786.35 per ounce.

The recent sharp weakness in the value of the lira has raised concerns of Turkey’s ability to finance its debt, which is mostly denominated in foreign currency.

Rabobak International emerging market analyst Piotr Matys cautioned that it was too early “to declare that the worst is over for the lira. To our mind, the perceived calmness could be the eye of the storm”.

At 10am, the rand was at R14.2199 to the dollar, from R14.2446. It was at R16.1145 to the euro from R16.1583, and at R18.0793 to the pound from R18.1157