Weak dollar lifts rand, as market eyes Turkey

The rand was firmer against the dollar on Friday afternoon, but was somewhat choppy against the euro and sterling, with analysts warning the headwinds for emerging-market currencies remain.

International factors were in the driving seat, although some focus is on the ongoing wage negotiations at Eskom.

The euro extended recent gains against the dollar on Friday after Germany’s flash purchasing managers index (PMI) for June beat market expectations. It rose to 54.8 index points, against a consensus forecast of 53.5, with the services component of the print providing the biggest surprise to the upside. A reading above 50 indicates expansion.

While indicating a pick-up in activity in the second half of 2018, anecdotal evidence suggested the continuing war between the US and China over trade was slowing down activity, said Barclays Research analysts.

Trade concerns continue to hover over international markets, as does the oil price, with Brent crude rising on Friday amid signs oil-cartel Opec may reach a production deal that was somewhat more muted than originally signaled.

Opec, and non-member Russia, are meeting in Austria to discuss increasing production, but have faced truculence from Iran. Iran could wield a veto over any formal deal, but such a move wouldn’t necessarily prevent additional oil coming onto the market, reported Reuters.

Sunday’s election results in Turkey also threaten to spoil investor appetite towards emerging markets in general, analysts said.

After trading flat against the euro and pound, the rand firmed against these currencies in the afternoon session, with bonds following suit.

Local bonds were slightly better bid in the afternoon, with the benchmark R186 yielding 8.865% from 8.920% on Thursday, while the R207 was at 7.555% from 7.590%.

At 3pm, the rand was at R13.4437 to the dollar from R13.5834, R15.6675 to the euro from R15.7625, and R17.8681 to the pound from R17.992. The euro was at $1.1654 from $1.1604.