Rand rolling after reeling
China’s GDP boosts rise
THE RAND yesterday hit a twoweek high against the dollar, supported by better than expected second quarter gross domestic product (GDP) numbers in China.
The local unit breached the R13 psychological barrier against the dollar as the greenback continued to nurse losses after last week’s underwhelming inflation and retail sales data from the US.
The rand strengthened more than 1 percent to R12.9238 against the dollar at 5pm from Friday’s R13.03, while it firmed to R16.84 against the pound and rose to R14.81 against the euro.
The rand’s recent bullish run marks a sharp turnaround for the unit, which last week hit a high of R13.61 to the dollar as it struggled to shrug off the hangover from the ANC’s policy conference and the suggested nationalisation of the Reserve Bank. But on Wednesday, the rand exhibited signs of life after the US Federal Reserve adopted a dovish tone to its monetary policy.
It strengthened further on Friday as US inflation numbers fell outside the Fed’s target ranges and retail sales fell for a second consecutive month in June.
Allet Opperman, an analyst at TreasuryOne, said momentum was on the rand’s side following international developments and local moves to stabilise the ailing state-owned enterprises.
Opperman noted that the rand was also boosted by the news that Dudu Myeni would not serve another term as the chair of the beleaguered SA Airways.
“The weakness of the dollar has helped risky currencies in the short term as the bad inflation number will cause some jitters within the Fed, as a hike in December is becoming less likely,” Opperman said.
“News out of the Fed will be watched closely as they are the main movers of the market at this stage in the US.”
News that China, the world’s second largest economy and a key driver for emerging markets’ growth, had over-performed boosted sentiment in international markets on global growth prospects during the second quarter.
China also reinforced recoveries for commodity exporters. The National Bureau of Statistics of China said the Chinese economy grew at 6.9 percent year-on-year in the second quarter, beating the target of 6.5 percent target set by the government.
In May, Moody’s downgraded China’s credit rating for the first time in nearly three decades on concerns over its debt.
Last month, the World Bank forecast that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade, rising market confidence and stabilising commodity prices allow growth to resume in the commodity-exporting emerging market and developing economies.
The bank further said growth in emerging markets and developing economies would pick up to 4.1 percent this year from 3.5 percent in 2016.
Tiffany Pollock, an analyst at Merchant West, said the rand had regained its appeal.
“Technically, the rand has been getting support from momentum indicators which showed it was straying into oversold territory last week, while bets on a modest Federal Reserve rate hike path have helped to retain its yield appeal,” Pollock said.
The positive Chinese data also helped resources stocks on the local bourse inch higher. Global resources miner and trader Glencore was up 0.52 percent to R54.24, while Gold Fields was up 0.82 percent to R49.42, and Lonmin rose 14.82 percent to R12.86 following the release of an improved quarterly production report.
Analysts from Momentum SP Reid said the rand and South African equities were expected to continue their improvement in the short term.
“The rand continues to exhibit short-term technical improvement aided by the loss of traction in the greenback,” the analysts said.