While the JSE’s All Share Index is down 1.72% over a month, it was up at 1.5% this morning and is holding strong over the longer-term: 73.25% up over five years.
Image: Nicola Mawson / Independent Newspapers
Following US President Donald Trump’s whiplash announcements last week – higher-than-expected tariffs being imposed on “Liberation Day” followed by a 90-day ceasefire in his trade war – markets seesawed, and the rand hit a historic low against the greenback, flirting with R20.
The local currency has since started recovering. On Monday morning, as the world heads into a short week, the rand started the day at R19.03 before dropping below R19 to trade at R18.88 around 10.45am, continuing a downward trajectory.
While the JSE’s All Share Index is down 1.72% over a month, it was up at 1.5% this morning and is holding strong over the longer-term: 73.25% up over five years.
Anchor Capital CEO & co-chief investment officer, Peter Armitage, said that the rand was only down 2% for the year against the dollar, although the local currency had really lost out against the euro.
Economists have also noted that the local currency has been adversely affected by concerns that the Government of National Unity (GNU) may be falling apart.
Head of Fixed Income at Anchor Capital, Nolan Wapenaar, said this morning, during a webinar, that some of the rand risk premium has been traded out when it comes to the new administration because it seems that the GNU could be reset as GNU 2.0, which will be an operational improvement. Although there will still be some National Budget hangover, anything towards R18.50 is plausible, he said.
Armitage added that the dollar’s status as a safe haven is being questioned, with global investors wanting their money denominated in another currency for the time being. However, Wapenaar noted that there was not a direct flow through to the rand given domestic factors.
As uncertainty persists, the dollar is approaching its lowest level in three years, Bianca Botes, Director at Citadel Global said on Monday morning. She explained that this is on worries that the US will see slower economic growth and “deepening trade tensions, despite a temporary 90-day reprieve on other US trading partners aimed at easing negotiations”.
Amid global uncertainty, emerging market currencies like the South African rand are volatile, reflecting broader risk aversion for most of the week, seeing large swings daily, said Botes. She noted that the recent rebound was in tandem with emerging market recoveries.
The April 2 reciprocal tariffs “triggered immediate chaos in global financial markets,” said Botes. She noted that Wednesday’s 90-day grace period “sparked a dramatic rebound in markets”.
“However, this was short-lived and global equity and bond markets resumed their selloff on Thursday as uncertainty persists regarding the long-term impact of Trump’s tariff policies,” Botes noted.
Botes added that “turbulence is, yet again, the best descriptor for the week”. As some countries seek to negotiate better terms, China remains resolute in its retaliatory implementation of 84% in import duties.
Investec chief economist Annabel Bishop noted that, “despite the ninety days pause, and some market stability, the risk averse climate could persist in the uncertainty and unpredictability, causing weakness in markets while the impact on US inflation is yet to come through”.
Armitage said businesses are left with uncertainty as to where they stand and are less likely to deploy capital in this environment. “We live in some interesting times.”
While the market could move around 10% or more over the next few weeks, these kinds of moves do happen and are difficult to forecast, said Armitage. “Most of these [moves] are man-made and when we say man-made, it’s one man.”
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