Rand skids to over R12/$ as trade war intensifies

Cape Town - The rand weakened to above R12 to the US dollar on Friday, amid the ongoing trade war between the US and China.

Locally, the Durban High Court postponed the corruption case against former president Jacob Zuma to June 8 following a brief appearance.

• FOLLOW LIVE: Jacob Zuma addresses public after court appearance

At 10:19 the local unit was trading 0.75% weaker at R12.06 to the greenback, after opening at R11.97/$.

TreasuryONE dealer Andre Botha said on Friday that the trade dispute between the US and China was having a definite negative impact on emerging market currencies.

"It seems that the trade war saga has entered a new phase with both parties refusing to back down and the markets have finally started to get more wary of this impasse," he said. 

"The longer this impasse drags on, the more uncertainty will seep into the market and the greater the knock-on effect will be to emerging market currencies and other risk-based markets. We have seen the rand break above the R12/$-mark this morning, and the feeling is that we can head a little higher if the current sentiment holds."

All eyes on America

Botha said global markets would be closely watching the release of non-farm payroll employment data out of the US, which will give a measure of the health of the US economy. He said that disappointing data could ease pressure on the rand somewhat.

While the US/China trade war was currently dominating the movements of US dollar, the trade dispute would have the knock-on effect of upping pressure on emerging markets and their currencies, said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions.

She said the rand would likely be fairly range-bound in the short term, with a gradual decline against the major currencies.

Adam Phillips of Umkhulu Consulting said a stronger US dollar has been aided by a recovery in equities. He noted that that US President Donald Trump on Thursday night had stepped up the tempo in his tariff dispute with China by asking his team to look at an additional $100bn in products that could be added. 

"Like other emerging market currencies feeling the strain, the rand has been pushed above R12.00/$. We could get up to R12.10/$ and that will be a big area," said Phillips.

"From an economic data perspective it has been a quiet week up to now. That all changes today with the release of US non-farm payrolls, unemployment and average earnings."

Economists in the US will be looking for 193 000 jobs being added, the unemployment rate to stay at 4% and average earnings staying at 0.2% month on month, he added.

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