Rand tests R15/$ mark, amid market concerns over China's Evergrande

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The rand neared the R15/$ mark on Monday morning.
The rand neared the R15/$ mark on Monday morning.
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  • The rand started the day at R14.89/$ and had been nearing the R15/$ mark during mid-morning trade.
  • It's trading softer against the backdrop of suspended trade of Chinese property group Evergrande.
  • Investors await an announcement on the way forward for the indebted property firm.

The rand tested the R15/$ mark during mid-morning trade on Monday.

On a week-on-week basis, the local unit last week lost 0.7% against the dollar, the Bureau for Economic Research (BER) noted in an economic update. Relative to the euro and pound, it ended the week 1.7% weaker.

It started Monday at R14.89 and at one point touched R14.99 to the greenback.

TreasuryONE currency strategist André Cilliers noted the rand was trading "a touch softer" on Monday amid concerns over Chinese property developer, Evergrande, resurfacing. "Investors have turned cautious once again after trading in Evergrande shares was suspended this morning," Cilliers said.

Trade of Evergrande's shares was suspended, with investors awaiting an announcement on its future, BBC News reported.

Citing Chinese media, Reuters reported that Hopson Development Holdings, whose shares were also suspended, plans to buy a 51% stake in Evergrande. The transaction is valued at more than $5 billion, according to the report.

"Markets will be watching the Evergrande developments closely, but this week's big factor will be Friday's payrolls and unemployment numbers," said Cilliers.

A decline in the number of Americans filing new claims for unemployment benefits signals an improvement in the US economy, noted Bianca Botes, director at Citadel Global.

Commodities are also an important factor to observe. "Elevated commodity prices boost exports, and South Africa remains strong in this respect, although in the long term, Eskom's newly stated commitment to transitioning from coal to renewable energy could impact coal mining demand," Botes explained. 

The BER noted that the rand was helped last week by export commodity prices - specifically the Richards Bay coal price surged by almost 30% - exceeding $200 per ton.

"A domestic coal supply crunch in China and surging natural gas prices in Europe has driven up the demand for coal in recent weeks.

"In terms of local export earnings, the much higher coal price (up by 130% so far in 2021) should help to counter the likely loss of export revenue from, amongst others, the declining iron ore price," the BER said. 

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