Rand steadies despite rattles

THE RAND recovered slightly on Friday following a week of volatility that saw the revised Mining Charter, current account deficit and Public Protector Busisiwe Mkhwebane’s challenge to the Reserve Bank’s primary mandate rattling the markets.

By 5pm on Friday, the rand was bid at R12.94.

On Wednesday, the currency hit R13.13 in early trade and traded below the psychological barrier of R13 for the better part of the week before recovering as the Constitutional Court judgment on the secret ballot gave confidence in the country’s institutions.

Investec economist Kamilla Kaplan said the currency took a cue from the developments that dominated the country’s public discourse

“On Friday, the rand steadied, aided by a slightly weaker dollar and market relief over the SA Constitutional Court ruling that the vote of no-confidence against the president may be held in a secret ballot,” Kaplan said.

Mkhwebane sent the rand into a tailspin on Monday when she recommended that Parliament should change the constitution in order to refocus the SA Reserve Bank from implementing monetary policy and targeting inflation to the socio-economic well-being of the country.

Analysts from Momentum SP Reid said the rand had managed to recover from the fallout.

“Our short-term indicators suggested R13.18 as a realistic trading target for the rand. However, we also noted that the ‘relative performance’ of the domestic unit remains brisk. Excluding the threat of an additional downgrade or an unanticipated political development, the overall tonality for the rand remains relatively firm, clearly negating our short-term view for the moment,” the analysts said.

Last week also saw a marginal uptick in inflation while the current account deficit widened to 2.1 percent of GDP in the first quarter from 1.7 percent in the previous quarter.

Mamello Matikinca, an economist at FNB, said she expected the acceleration in inflation to resume in the second half of next year.

“If inflation falls more than forecast and the rand doesn’t weaken beyond our projections, interest rates may well be cut later in the year.

“However, the SARB will have to weigh the impact of political uncertainty on global sentiment towards South Africa and the rand, and the threat of further downgrades,” Matikinca said.

This week the country will await key economic data to be released with the trade balance, the producer price index (PPI), private sector credit extensions and the quarterly employment statistics all expected to come out.

Matikinca said: “Having retreated to 4.6 percent year on year in April from 5.2 percent in March, we expect to see a modest tick lower PPI rate for May. Credit extension for May will likely see continued easing among households and corporates, a result of weak credit appetite as both corporates and individuals lack the confidence to invest.

“We expect a small surplus of trade figures for the month as commodity demand remains stable, the oil price eased and domestic demand remains weak.”