Rand rides out volatility as JSE flags

SOUTH African markets ended an action-packed week mixed, with the rand putting up a strong performance while the JSE fared poorly.

The rand rallied in intraday trade to its best level to the dollar since December, driven primarily by a weak US currency and domestic factors.

The Constitutional Court’s ruling, which validated the public protector’s findings against President Jacob Zuma on his Nkandla homestead, helped push the rand to a high of R14.63/$. It firmed further to R14.60/$ as Zuma was addressing the nation on Nkandla on Friday night, before pulling back to R14.68/$ shortly afterwards.

In a unanimous decision, the court found that Zuma had failed to uphold and respect the constitution and ordered him to pay back reasonable expenses on his Nkandla homestead.

“The Constitutional Court ruling has undoubtedly spurred rand optimism. There are, however, a few cautious heads warning that the country could be in for a deeper political crisis,” Rand Merchant Bank analysts said in a note. “The question everyone wants to know is whether the president will leave office: most political analysts still do not think so.”

But it was US Federal Reserve chairwoman Janet Yellen who sparked a broad rally in emerging-market currencies when she expressed caution on raising interest rates in the US.

Meanwhile, the local share market ended weaker, dragged down mainly by resources and industrial stocks. The All Share index finished 1.41% weaker at 51 584.10, partly the result of a stronger rand, which took the shine off rand-hedge stocks.

The picture on global markets was patchy too, with Asian and European stock indices settling weaker on the week, but US markets were positive.

The closely watched US nonfarm payrolls report exceeded market expectations but had little effect on different asset classes. US employers added 215 000 jobs in March, surpassing estimates of 205 000 jobs, according to economists surveyed by Thomson Reuters.

Platinum rallied almost 4%, but copper and oil were little changed on the week.