Rand steady with US markets closed for US public holiday

The rand was largely unchanged on Wednesday afternoon as the dollar made marginal gains against the euro, ahead of the release of the US Federal Reserve’s latest meeting minutes on Thursday.

Volumes were thin as the US celebrated a public holiday.

Although the rand has held up relatively well at levels below R14 to the dollar over the past few sessions, analysts emphasise that global sentiment remains fragile amid growing fears over a global trade war.

“With trade tension escalating by the day, market caution is set to remain a recurring theme moving forward,” said FXTM analyst Lukman Otunuga.

Emerging markets were bracing themselves for another bout of trade tension, with the US set to slap a 25% tariff on up to $34bn of Chinese products on Friday. Emerging-market currencies were likely to be caught in the crossfire should China retaliate.

The rand appeared to fail to capitalise on relatively positive local economic news, with the Standard Bank purchasing managers index (PMI) rising to 50.9 points in June. A score above 50 points indicates economic expansion.

At 3pm, the rand was at R13.6775 to the dollar from R13.6746. It was at R15.9247 to the euro from R15.9429, and R18.0729 to the pound from R18.0446.

The euro was at $1.1643 from $1.1659.

Local government bond yields were lower, with the market reacting to the recent firmer trend in the rand. The R186 was last bid at 8.75%, from 8.84%, and the R207 at 7.44% from 7.52%.

Analysts said risk-off sentiment had eased following Chinese comments that it would support the yuan.

US treasuries have been little changed ahead of the Fed minutes, with the 10-year stable at 2.8303% in earlier trade. After rising to 3.12% in June, its yield has reversed course, while shorter-term yields are climbing, causing a flattening of the curve. Some analysts have expressed concern about this trend, as it usually points to a future recession, brought about by a hawkish policy mistake by the central bank.

However, at present the most obvious reason for this trend is that the Bank of Japan and European Central Bank (ECB) continue with their stimulatory policies, making US bonds relatively more attractive, commentators have said.