Trump tramps on the rand
Investors conclude US rate hike on the cards
THE RAND slid more than 4 percent against the dollar yesterday, hitting three-week lows as investors concluded a December Federal Reserve interest rate hike was on the cards following Donald Trump’s election as US president.
Stocks rose, riding on the coattails of the firmer greenback and higher commodity prices. At 5pm, the rand was bid at R14.0213 per dollar, 43.15c lower than its Wednesday bid.
“The rand weakness is entirely on the back of the firmer dollar… You’re seeing weakness across emerging market currencies,” said Wichard Cilliers, the chief currency dealer at Treasury One.
The rand had traded a touch firmer early on as short sellers booked profits after it slid to one-and-a-half-week lows on Tuesday in the wake of Trump’s victory, but the currency eventually succumbed to the dollar’s resurgence.
“The dollar’s maintaining its strength and that’s piling pressure on (emerging markets)… Investors are trying to figure out what Trump’s policies are going to look like,” said Ricardo da Camara, an economist at ETM analytics.
The dollar index was 0.59 percent firmer.
Government bonds were weaker, with the yield on benchmark government paper due in 2026 adding 19 basis points to 9.02 percent. Stocks rallied on higher commodity prices globally, with the JSE Top40 index rising 1.2 percent, while the all share index was 1 percent higher.
Donald Trump’s rise to power is providing a shot in the arm for global financial markets, with stocks and commodities rallying on optimism that his fiscal-stimulus plans will boost the global economy. The MSCI all country world index wiped out its monthly drop, the Dow Jones industrial average climbed to a record high and emerging-market shares advanced. Copper was set for its biggest back-to-back jump in five years. The dollar rose against most major peers, while government bonds extended their selloff.
Lower taxes
Traders are betting Trump and a Republican-controlled Congress will lower taxes, ease corporate regulation and ramp up spending to spur
Investors are trying to figure out what Trump’s policies are going to look like.
economic growth. He pledged to at least double the $275billion five-year building plans of rival Hillary Clinton, while saying infrastructure will become “second to none” with millions working on projects. That meant commodities used to build everything from airports to bridges would benefit under his presidency, according to Goldman Sachs Group.
“It’s a relief rally of the certainty of the outcome of the election and after the conciliatory tone that Trump took,” said Nick Skiming, a fund manager at Ashburton.
The Dow Average rose 139.70 points, taking it above its August 15 record.
All industrial metals advanced on the London Metal Exchange (LME), with zinc adding 1.8 percent, nickel up 0.3 percent and copper advancing 3.4 percent by 2.28pm London time. The LME index on Wednesday rose 2.1 percent to its highest since June last year.
“The clearest message delivered by Donald Trump in his election victory speech was a focus on greater infrastructure spending in the US,” Goldman’s analysts including Damien Courvalin and Jeffrey Currie said in a November 9 report. “Without specific details it is hard to quantify the impact on commodity demand, however such policies would support steel, iron ore, zinc, nickel, diesel and cement.”
Oil fell as the market’s focus shifted from Trump’s shock US presidential election victory to questions about Opec’s ability to rebalance crude supply and demand.
A $15bn Treasury 30-year bond auction yesterday offered fresh insight into global sentiment toward US debt under the pending stewardship of president-elect Donald Trump one day after traders greeted his election by inflicting the biggest sell-off in five years.