Rand rallies with new president
Currency to remain steady at R11.70
THE RAND traded 25 cents stronger at 5pm during intraday trade yesterday, breaking through the key psychological level of R11.70, as investors and markets welcomed South Africa’s new president, Cyril Ramaphosa.
By 5pm the rand was at R11.63 against the dollar. The local currency, which has been the best performing currency against the dollar post the ANC elective conference in December, was set to remain steady around the R11.70 against the dollar mark in the coming sessions.
Annabel Bishop, chief economist at Investec, said yesterday that the rand had strengthened to R11.599 to the dollar, piercing the resistance level of R11.70.
She said comments by Ramaphosa at the State of the Nation Address might propel the domestic currency convincingly through R11.60 to the dollar.
Bianca Botes, an analyst at Peregrine Treasury Solutions, said the rand was expected to trade in a range of R11.70/12 against the greenback leading up to the Budget speech.
“Should the State of the Nation and the Budget speech go down without too much criticism, one can almost assume that Moody’s will hold off from downgrading South Africa’s credit rating for the time being,’’ Botes said.
Rand investors, global market participants and the rating agencies will be keenly awaiting the 2018 Budget. It is unclear whether there will be a mass cabinet reshuffle under the new president.
Business sentiment under the Zuma presidency had been battered, with the markets often frowning at his corruption-riddled administration, which came to a head with state capture allegations.
However, business sentiment has been resurgent since Ramaphosa, whom the markers deem to be business-friendly, took the helm of the ANC.
Bishop said market optimism towards South Africa had risen further with net foreign portfolio flows into local equity market now close to R40 billion since Ramphosa’s election as president of the ANC, and incoming data was likely to show further inward investment on his recent investiture as South African president.
Vele Asset Managers said Ramaphosa was inheriting an economy that was on an economic turnaround supported by a synchronised global recovery, stronger commodities, better than expected mining production, manufacturing production as well as retail sales numbers posted in the second half of last year.
Maqhawe Dlamini, the chief investment officer and director of Vele Asset Managers, said: “The much improved investor/ business sentiment bodes well for future economic activity, which will lead to better than expected economic growth in the short term.
“The long-term prospects will depend on policy execution, which again will depend on actions he takes.”
He said global investors were still underweight towards South Africa within the emerging market space, but an improvement in investor sentiment towards South Africa should lead to the much-needed capital inflows.