UPDATE: After firming, rand weakens in wake of stimulus announcement

Money. (Duncan Alfreds, News24)
Money. (Duncan Alfreds, News24)

The rand has firmed 0.65% to R14.19/$ following the release of President Cyril Ramaphosa's R50bn economic stimulus package on Friday morning, but subsequently weakened to trade at R14.36/$ by 13:16. 

Shortly after the plan was released, Wichard Cilliers from TreasuryONE said in a snap note to clients: "Ramaphosa laid out his plan for economic reconstruction and restarting the South African economic engine.

"A lot of emphasis was placed on job creation and infrastructure spending. This will necessitate a reprioritisation of the budget, which we will see in the mid-term budget speech."

A further key area was agriculture, with interventions for black commercial farmers to increase entries into food value chains, and a 10-person advisory panel on land reform.

Ramaphosa said he was certain the plan would "have an impact" and said labour and business had pledged to support it.

Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions, earlier said although the rand remained vulnerable to global risks, the economic stimulus package could assist it in the short-term.

Botes expects the range of trade to be between R14.18/$ and R14.45/$ for the rest of the day.

In a market update RMB's head of markets research Nema Ramkhelawan-Bhana said a rand recovery could be possible if the market is “enthused” by Ramaphosa’s economic stimulus package.

“The president has stated that the measures would ‘secure confidence in sectors affected by regulatory uncertainty’ – which we can only take to mean that there will be pronouncements on the much-anticipated mining charter, which was approved by Cabinet on Wednesday.”

So far, the rand gains and those of emerging markets have been driven by the easing of trade tensions, fresh international equity gains and a subdued US dollar, she explained.

Analysts from NKC Economists said that apart from dollar weakness, the economic stimulus has had a role in the rand’s strength. NKC expects the rand to trade within a range of R14.20/$ and R14.50/$.

TreasuryONE senior dealer Andre Botha said that if the economic plan is positive, it could see the rand "carrying on with this momentum" and possibly strengthen to R14/$. 

By 11:11 the local unit  was trading 0.65% R14.19/$. 

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