The rand stabilised at a relatively weaker levels on Wednesday morning, following its steepest decline against the dollar since mid-August, in line with lower commodity prices.
The spot price of palladium steadied in early trade, after tumbling for the seventh consecutive session, leaving it below the $2,000/oz mark for the first time since July 2020. Palladium, along with rhodium and platinum, is used to clean the emissions of internal combustion engines.
More broadly though, commodity prices have come off the boil since peaking in the first half of 2020, leading to the sharp correction in JSE-listed mining shares, which has in turn affected the overall share market.
The JSE precious metals and mining index is 32% below its peak in March, while the resource 10 index has fallen 16% since May.
Higher commodity prices have partially shielded SA against the devastating effect of Covid-19 pandemic through a higher trade balance, which has supported the rand over the past year.
The rand was down 0.31% to R14.3485/$, despite the softer-than-expected US consumer inflation figures on Tuesday, which could delay the Federal Reserve’s decision to taper its bond-buying programme.
The rand is been sensitive to the prospect of a reduction in the bond-buying programme, weakening to R15.40/$ during August — the weakest level in five months — before bouncing back to its current levels.
While some argue the recent spike in US inflation is temporary because it was fuelled by the reopening of the US economy after pandemic-induced interruptions, others insist that higher inflation could be durable.
The JSE is likely to trade lower in line with other global markets, after weaker Chinese retail sales and industrial output fanned the concern of a slowing global growth.