Rand surges as investors buy riskier assets
Nears pre-pandemic levels after Biden win
THE RAND surged near its best level in eight months last week, rising to pre-pandemic levels as investors bought riskier assets after Democrat Joe Biden was officially elected president of the US.
The markets were pricing in that Biden would win the hotly contested election and beat incumbent Donald Trump, who filed a court challenge to contest vote counting in key swing states.
Market volatility has seen the rand struggling to gain traction this year as it was battered by Covid-19, the oil price war and the deepening recession.
But last week was the best for the rand since early March as it began Monday trading at R16.23 against the dollar due to uncertainty over the US presidential election when counting was stalled.
On Friday, the rand closed 0.02 percent stronger at R15.76 to the dollar as emerging-market currencies gained on the risk-on sentiment.
The JSE also rode the positive sentiment, bolstered by the rise in mining and general retailer stocks.
The FTSE/JSE All Share Index rose 2.1 percent to 56 387 points, and the Top40 Index surged 2.19 percent to 51 876 points.
The mining index rose 2.15 percent to 50 057 points, while the general retailers index was 1.48 percent higher at 4 239 points.
The banks index, however, was 0.63 percent lower at 5 639 points.
Anchor Capital’s Nolan Wapenaar said that a Biden win was positive for the rand.
The wealth and asset management firm said it might use any further rand strength to increase its exposure to dollars in a phased approach.
“A Biden administration is expected to push for a stimulus package, which the markets are eagerly anticipating,” Wapenaar said.
“Similarly, policy is expected to
be more predictable and, for now, this should create a more supportive environment for emerging markets, and consequently also be supportive of the rand.”
Biden’s administration is expected to undo a number of policies implemented by Trump and improve US foreign policy.
It is also expected to bring in as much fiscal stimulus as possible to ensure a sustainable economic recovery in the short and medium term.
Oxford economist Gregory Daco said Biden would find it difficult to enact his major tax and spending proposals.
Daco, however, said increased policy certainty, trade multilateralism and a pro-immigration stance should generally benefit the economy.
“Our November baseline assumes a short-term fiscal relief bill around $1 trillion will be passed around year-end, but this will be subject to heightened policy uncertainty during the lame-duck session of Congress,” Daco said. “Further, we stress that a non-peaceful transfer of power is a risk to monitor closely.”
Investors will now be observing how Biden deals with the Covid-19 pandemic as cases in the US have been rising by more than 100 000 a day, while some countries in Europe have reintroduced lockdown measures.