Trump's tariff announcement deals fresh blow to falling rand

The rand started on the back foot against the dollar on Friday morning, after weakened on Thursday evening following the announcement of new tariffs on Chinese good by US President Donald Trump.

The rand had been fairly steady earlier in the week when the US Federal Reserve Bank, as expected, announced a rate cut by 25 basis points. But a less than dovish statement of Fed chair Jerome Powell left markets in a tailspin, causing the local currency to weaken by 1% on Wednesday evening.

It extended its losses on Thursday to reach the R14.50/$ mark.

On Thursday evening, meanwhile, Trump announced an additional 10% tariff on $300bn worth of Chinese good. This again impacted the rand, which touched R14.68/$ overnight.

On Friday it opened at R14.66/$.

"The rand is expected to remain under pressure, given the rally in the dollar on the back of a less dovish Fed," said Treasury partner at Peregrine Treasury Solutions Bianca Botes.

"With the Fed announcement out of the way, we will see local fundamentals as well as economic data become more relevant once again in the pricing of currencies, and the picture locally remains a dismal one," she added.

Other risks weighing on the local currency include a potential downgrade of SA credit rating, record high unemployment levels, Eskom's drain on the fiscus, poor revenue collections by the SA Revenue Service, subdued economic growth and ongoing geopolitical tension between the US, China and their trading partners, Botes said.

In a market update, TreasuryONE senior dealer Andre Botha noted that the rand is currently the weakest performing emerging market currency. 

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