MARKET WRAP: Rand reverses gains on stronger dollar

The rand reversed the session’s gains on Monday on the back of a stronger dollar, while investors digested President Cyril Ramaphosa’s new cabinet.

The local currency touched an intraday high of R17.9415 — its best level in almost two weeks — as “the announcement of the new cabinet brought an end to two weeks of uncertainty and fears of a breakdown of the GNU [government of national unity]”, Citadel Global director Bianca Botes said. 

Analysts said of particular significance for domestic markets was the retention of Enoch Godongwana as finance minister, “signalling a continuation of the prudent fiscal consolidation framework and projected trajectory outlined in the February budget and medium-term expenditure framework”, said RMB analysts earlier.

However, the rand and its emerging-marketing peers weakened during the day “as the dollar strengthened mostly because of weaker ISM manufacturing and purchasing managers’ index figures out of the US, leading to US treasury yields rising”, said TreasuryONE currency strategist Andre Cilliers.

“This caused the US dollar to be on the front foot and an increase in the USD index, hence increasing in value against major and emerging market currencies,” said Cilliers.

At 5.55pm, the rand had weakened 0.59% to R18.2925/$ and 0.86% to R19.6529/€, while it had strengthened 0.22% to R23.9617/£. The euro was 0.14% firmer at $1.0727.

On Monday, Ramaphosa’s “bloated” cabinet of the GNU received mixed reactions from labour federations and opposition political parties, who cast it as nothing but a DA-ANC grand coalition. 

The cabinet consists of 32 ministers and 41 deputy ministers, with the DA bagging six ministerial positions and six deputy minister positions, on top of its MP Annelie Lotriet being elected deputy speaker of parliament recently. 

Still, RMB head of forex execution Matete Thulare said markets expected the new cabinet to hit the ground running “as they need to accelerate economic reforms to get the ailing economy back on track”.

Globally, the US manufacturing sector in June edged further into contraction territory, according to the Institute for Supply Management’s monthly survey of purchase managers on Monday, driving US treasury yields higher, reported Bloomberg. 

Investors will this week watch for the June jobs report on Friday, which should give some insight into the strength of the economy and the outlook for Federal Reserve rate cuts in 2024.

The JSE all share gained 0.18% to 79,853 points, while the top 40 lost 0.24%.

At 6.10pm, the Dow Jones industrial average was 0.14% firmer at 39,173 points, while markets in Europe were mostly firmer.

In the commodities market, gold gained 0.22% to $2,331.42/oz, while platinum lost 1.71% to $977.30/oz. Brent crude was 1.58% firmer at $86.33 a barrel.

tsobol@businesslive.co.za