Rand topples off 'pedestal' after Ramaphosa's land reform announcement - analyst

The rand started Friday trade at R13.46/$ - more than 2% weaker than at its close on Tuesday evening, with market bias once again tipping the scale towards weakness, says Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions.

She said the rand started the week on a good footing, with most analysts anticipating a move towards R13.00/$.

"However, the rand fell off its pedestal with very little grace in the wake of Predident Cyril Ramaphosa's announcement on land reform, the overpowering global economic backdrop and, of course, the troubles in Turkey," she commented on Friday.

On Tuesday evening Ramaphosa announced that the ANC would vote in favour of land expropriation without compensation.

"This move, dubbed as a political ploy to suffocate the EFF, is bound to affect agricultural production, employment, economic growth and impact our financial markets," said Botes.

Dollar strength

Adam Phillips of Umkhulu Consulting said on Thursday the rand tested R13.50 to the US dollar at one stage. In his view this had little to do with land expropriation, but was related to dollar strength against other currencies.

"At this stage there does not seem to be any reason to sell dollars, although the numbers this afternoon might change this," commented Phillips.

"I cannot, however, provide much confidence to importers of any decent moves in their favour for today."

Gerrit van Rooyen of NKC expects the rand to trade between R13.30/$ and R13.55/$ on Friday.

He said the rand weakened against the dollar during European trade on Thursday, along with other emerging market currencies, after the White House announced it would consider raising the rate of proposed tariffs on an additional $200bn worth of Chinese imports to 25% from 10%.

"The trade-weighted US dollar was also trading stronger ahead of Friday’s US job reports. At close of local trade, the rand quoted 1% weaker at R13.39/$, after trading in range of R13.21/$ to R13.51/$. The rand also traded weaker overnight," said Van Rooyen.

RMB said on Friday that, at a time of heightened geopolitical tension and policy ambiguity, the potential for overnight news flow to unnerve the global currency market is particularly high.

"The rand market has, for the most part, taken domestic shocks in its stride, with rand/$ reverting to below 13.30 at the close of three of the five trading days," commented RMB.

Thursday, however, was the exception, with the rand hitting a high of 13.50 in intra-day trade "as the market fell prey to resurgent trade-war concerns which fractured global risk sentiment".

By 11:48 on Friday the rand was trading 0.14% weaker at R13.45/$.

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