Rand runs from hovering Hawks

SOUTH African markets ended higher on Friday after an action-packed week that highlighted the influence of central banks on financial markets.

The rand was a clear outperformer relative to the dollar and other major currencies, even as it drifted off the week’s best levels.

The local currency briefly touched R13.38/$, a level last seen in August, before the spat between the Hawks and Finance Minister Pravin Gordhan resurfaced and weighed on sentiment.

The rand has benefited in part from a weaker dollar after the US Federal Reserve this week revised down its forecasts of potential rate hikes in 2017. The US central bank kept rates unchanged.

“I think the market’s reaction to the Fed move is a little surprising given that Fed fund futures were indicating only about a 20% chance of a hike and that the Fed dot plot [chart] indicated that a hike this year is still quite possible,” said Brad Preston, chief investment officer of listed investments at Mergence Investment Managers.

“Having said that, the move lower in long-term expectations for rates as indicated in the dot plot for 2017 may be the more important driver, essentially indicating that while rates will rise, they will rise very slowly.”

The stronger rand took the shine off some of the big industrial stocks on the JSE, leaving the All Share index marginally higher at 51 999.50 points. Brewing giant SABMiller and video and entertainment group Naspers dragged the index lower.

But commodity markets gained broadly, with gold stocks ending a six-week losing run as metal prices rebounded slightly in line with a weaker dollar. Anglo American jumped a further 10% over the week, extending gains to a heady 143% so far this year, which makes it the best performer in the Top 40 index.

Financial stocks, particularly banks, settled broadly higher as did retailers.

South African markets will likely take direction from overseas markets early this week before the release of local trade data on Friday. The producer price index for August will also come under the spotlight.