Gi­gaba as­sur­ance boosts the rand

Doubts over US econ­omy

The Star Late Edition - - BUSINESS REPORT - Siseko Njobeni and Reuters

THE rand yes­ter­day strength­ened fur­ther against a weak­en­ing United States dol­lar, boosted by slow­ing in­fla­tion and re­as­sur­ances by Fi­nance Min­is­ter Malusi Gi­gaba that the gov­ern­ment does not plan to na­tion­alise the coun­try’s mines and banks.

At 6.50am the rand had gained 0.36 per­cent to R13.2300 per dol­lar, its firmest level since March 31, com­pared with an overnight close of R13.2775 in New York.

The cur­rency plunged as low as R13.9800 to the dol­lar on April 10 af­ter a cab­i­net reshuf­fle prompted rat­ings agen­cies Stan­dard & Poor’s and Fitch to down­grade the coun­try’s sovereign credit rat­ing to sub-in­vest­ment grade.

The cur­rency was trad­ing at R13.16 to the dol­lar at 5.05pm yes­ter­day.

“Global short-term pres­sures on the rand have eased,” RMB global mar­kets an­a­lyst John Cairns said in a note. The dol­lar was weak­en­ing sharply be­cause the mar­ket was re­assess­ing the outlook for the US econ­omy, Cairns said.

“It is too early to say that the mar­ket has found a new post-down­grade level. And there re­mains a lot on the po­lit­i­cal front that will shock,” Cairns said.

Ned­bank chief econ­o­mist Den­nis Dykes at­trib­uted the rand’s re­silience to the weaker dol­lar, which he said has come un­der pres­sure be­cause of doubts over Pres­i­dent Don­ald Trump’s abil­ity to de­liver on his pro­gramme aimed at stim­u­lat­ing the US econ­omy. Pound boosted On the other hand, Bri­tish Prime Min­is­ter Theresa May’s call for a snap gen­eral elec­tion in June has boosted the pound, Dykes said. The pound soared to new highs soon af­ter May’s shock an­nounce­ment this week.

The elec­tion is ex­pected to strengthen May’s hand in ne­go­ti­a­tions over the United King­dom’s with­drawal from the Euro­pean Union, in­creas­ing the chances of a smoother exit. “As a re­sult, some money is flow­ing there,” Dykes said.

On Wed­nes­day, data showed that South African in­fla­tion slowed to 6.1 per­cent in March, and Gi­gaba moved to re­as­sure in­vestors af­ter his newly ap­pointed ad­viser, Chris Ma­likane, called for the na­tion­al­i­sa­tion of the banks and mines. Speak­ing ahead of his trip to the US this week, Gi­gaba said he would re­as­sure rat­ings agency Moody’s that the re­cent cab­i­net reshuf­fle would not re­sult in changes to gov­ern­ment pol­icy.

Moody’s ear­lier this month placed South Africa’s sovereign credit rat­ing on re­view for a pos­si­ble down­grade.

On Wed­nes­day, S&P Global Rat­ings warned that South Africa’s credit rat­ing could be down­graded deeper into “junk” ter­ri­tory if on­go­ing po­lit­i­cal un­cer­tainty stalls the re­forms re­quired to grow the econ­omy. SOUTH Africa has been ranked as the fourth most at­trac­tive econ­omy for in­vest­ments flow­ing into Africa.

This is ac­cord­ing to the lat­est Africa In­vest­ment In­dex 2016 by Quan­tum Global’s in­de­pen­dent re­search arm, Quan­tum Global Re­search Lab, which was pub­lished on Wed­nes­day.

Quan­tum Global is an in­ter­na­tional group of com­pa­nies ac­tive in the ar­eas of pri­vate eq­uity in­vest­ments, in­vest­ment man­age­ment as well as macroe­co­nomic re­search and econo­met­ric mod­el­ling.

The In­dex has been con­structed from macroe­co­nomic and fi­nan­cial indi­ca­tors and the World Bank Group’s Ease of Do­ing Busi­ness Indi­ca­tors.

South Africa re­ceived the num­ber four rank­ing be­cause it scored well on the growth fac­tor of gross do­mes­tic prod­uct, ease of do­ing busi­ness in the coun­try and sig­nif­i­cant pop­u­la­tion.

Botswana was named the most at­trac­tive econ­omy in Africa, based on a range of fac­tors that in­clude im­proved credit rat­ing, cur­rent ac­count ra­tio, im­port cover and ease of do­ing busi­ness – ANA

“Of the big coun­tries, that’s the one that has more risk at­tached to it po­lit­i­cally, even more so than Turkey. In Turkey, there is cer­tainty; in South Africa, there isn’t. They need a very sta­ble gov­ern­ment with a very clear pol­icy, and they don’t have that. As long as we have a coun­try that is driven by the in­ter­nal pol­i­tics of the ANC, I don’t see how it can get any bet­ter,” Daniel Moreno, an emerg­ing mar­kets debt fund man­ager at Rubrics As­set Man­age­ment, said.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.