Rand to remain vulnerable to global economic events this week

Cape Town – The rand opened at R11.85 to the dollar on Tuesday following the Easter break, with analysts saying it remains vulnerable to global events, including the trade war between the US and China and the release of US economic data on Friday.  

The currency was trading at R11.81 to the greenback by 10:15, and weakened to R11.85 against the greenback by 11:30. 

"The trade wars theme does not seem to want to budge at all. This time around it was China that fired the shots with them imposing counter tariffs against the USA," TreasuryONE dealer Andre Botha said in a statement.

"The rand is still looking to start recouping some of its losses following the South African Reserve Bank announcement that they think the rand is overvalued. Given the global and SARB sentiment, it seems unlikely that the rand will push significantly lower in the short term and with the SA calendar looking a little empty this week, the rand will be left to global factors to determine its direction."

Corporate treasury manager at Peregrine Treasury Solutions Bianca Botes said in a market update that the rand could move to R11.90 during Tuesday.

On Thursday last week the currency weakened to a low of R11.90 against the dollar on fears of how the trade war between the US and China would play out, coupled with the interest rate cut by the SARB on Wednesday and a wider-than-expected trade deficit. 

• READ: Rand claws back rate cut losses

Umkhulu Consulting treasury specialist Adam Phillips agreed with other analysts that the trade war between the US and China would likely dominate market movements.

Manufacturing purchasing managers’ index data for the UK and the eurozone is also expected to be published on Tuesday, which would give a measure of how those economies are performing.

"Locally we have vehicle sales for March coming out, and with very little being released from the US, all eyes will stay on equity markets,” he said.

“Currency markets in general are very quiet and maybe we will have to wait for US non-farm payrolls on Friday to see some action. It might be difficult for the ZAR to push below R11.80/$, while R11.90/$ would seem just as difficult to pierce,” he said. 

Locally the South African Revenue Service released its 2017/18 revenue performance at a briefing at 11:00 on Tuesday. Finance Minister Nhlanhla Nene said the preliminary results reflect revenue of R1.216trn.

This is higher than the R1.144trn reported in 2016/17. Treasury had set itself a target of R1.217trn for the financial year.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER