The rand remained on the back foot, depreciating further on Monday by 2.35% on fears that US import tariffs might start a global recession and due to political instability in South Africa, while the JSE took a breather after two days of big losses.

By late Monday afternoon, the rand was trading at R19.58 per dollar. The weakness followed the local currency depreciating by about 3% to the greenback last week. The JSE All Share Index, after a volatile morning that saw it decline by up to 5% following similar declines on Friday and Thursday, ended Monday 0.56% higher at 82 004.66 points.

The rand has declined by over R1 to the dollar in the past week, falling by 6% since March 31. It has lost about 4.7% of its value since US President Donald Trump announced higher import tariffs with that country’s major trading partners on Wednesday - the baseline 10% tariff took effect on Monday, and South Africa faces tariffs of up to 30% on its products exported to the US.

Fears of global recession gained impetus after China’s announcement that it plans to implement retaliatory tariffs of 34% on all US goods from April 10, 2025. European trade officials also met in Luxembourg to discuss a response to the US tariffs.

Late Monday afternoon in South Africa, and despite the stronger JSE, US stock markets opened slightly lower, but for instance, the S&P 500 was trading marginally higher as the morning progressed in the US.

Investec chief economist, Annabel Bishop, said in a note that the weaker rand will raise fuel prices and the cost of living. She said the threat to the DA’s participation has severely rattled financial markets.

While recent US dollar weakness would see the rand trading below R18 per dollar, nearing R17.50, instead it’s above R19 on high political risk. She said currently, the rand was the worst-performing in a basket of emerging market currencies. Bishop warned the rand is likely to weaken past its prior weak point of R20 a dollar if the DA exits the Government of National Unity.

“The rand would likely head towards R21 per dollar immediately and then weaken to beyond R22 per dollar, depending on the new partners of the GNU, with the sudden shock to financial markets, and worries over a left-shift in economic policy,” she said.

Old Mutual Wealth Investment Strategist, Izak Odendaal, said in a note that the US import tariff increases were in the same territory in terms of the impact on the US economy as the Smoot-Hawley Act, a 1930 piece of legislation that hiked the tariff rate to 20% and contributed to the Great Depression.

Odendaal said, however, the impact will not be the same this time round, as economic and geopolitical backdrops were very different. The US and global economies were also more services-oriented and less dependent on goods trade.

“Fiscal and monetary policymakers have learned important lessons in managing crises since the 1930s, and their actions will be important to watch,” said Odendaal.

Opportune Investments chief investment officer, Chris Logan, said he was not aware of what may have triggered the slight rise in JSE prices Monday, but he said the threat of a global economic recession was real at this stage, and it appeared, when compared with the Covid pandemic when governments rallied to support their citizens, that the governments were now causing the global crisis.

BUSINESS REPORT