Rand firms on China Covid drop

The rand headed below R17 to the dollar on Tuesday after China reported a decline in Covid-19 cases and moved to stamp out protests over the country’s zero-Covid policy.

Chinese health authorities reported 38,645 cases on Tuesday, down from a record daily high of 40,347 a day earlier, according to Reuters.

“A drop in Covid cases in China overnight saw the dollar lose some ground,” said TreasuryONE currency strategist Andre Cilliers. “However, what happens with the Covid situation could remain a risk-on barometer.

“We expect the rand to remain relatively rangebound and driven by international events in the short term,” Cilliers added. “The next Fed [Federal Reserve] meeting [on December 13-14] and Friday’s US nonfarm payroll number could give new direction.”

By 6.09pm, the rand was back just more than R17/$ after touching an intraday best of R16.925/$. It had strengthened 0.71% to R17.5842/€ and 0.82% to R20.3711/£. The euro was little changed at $1.034.

Investors are looking ahead to a speech by Fed chair Jerome Powell, with many expecting him to be hawkish, despite signs of slowing inflation.

In Germany, the November inflation reading fell slightly to 10% yesterday but remained near a record high, suggesting that while cost pressures have eased in Europe’s biggest economy they are unlikely ’to weaken the European Central Bank s [ECB] resolve to tame prices, Reuters reported.

“Inflation in Germany has been in double digits since September, and the increasing pass-through of surging energy costs to consumers suggests no reprieve is to be expected anytime soon,” said FXTM senior research analyst Lukman Otunuga.

“Looking further out, it will still take some time before inflation begins to cool significantly and sustainably. Accordingly, the ECB is expected to remain hawkish for a while longer, notwithstanding rising economic headwinds in the bloc.”

The JSE all share lost 0.33% to 73,127.92 points and the top 40 eased 0.27%. On Wall Street, the Dow Jones industrial average was 0.4% weaker at 33,715.14 points at 6.44pm. European markets ended the session mixed.

Commodity markets were stronger, with gold gaining 0.94% to $1,756.10/oz and platinum 1.93% to $1,006.6/oz. Brent crude rose 2.51% to $85.29 a barrel.