Rand hits the R19 mark against the dollar, as markets react to Sona
The rand breached the R19 threshold when compared to the US dollar on Monday, as the markets and economy continue to react to President Cyril Ramaphosa’s State of the Nation Address (Sona).
The rand was trading at around R19 at 10.30am on Monday.
REASONS FOR THE RAND’S SLUMP
Dynamic Outcomes argued that the rand was reacting to last week’s data and in particular the latest US employment figures.
The rand was also impacted by some business and manufacturing stats and Ramaphosa's Sona speech.
“Manufacturing production and the Purchasing Manager's Index (PMI) releases reflect the challenges within an economy that is lacking sufficient growth,” Dynamic Outcomes said in a statement.
According to Statistics South Africa (StatsSA) SA manufacturing production increased by 0.7% year-on-year in December 2023, but this is the slowest production increase in three months.
And the S&P Global South Africa Purchasing Managers’ Index was sitting at 49.2 in January.
Dynamic Outcomes noted that in terms of Sona, “Ramaphosa made a lot of promises and touted the ANC's (African National Congress) 'successes”.
“Ramaphosa all but promised a utopia where load shedding was almost as dead as the dodo, corruption is all but eradicated, and the dawn of a renewable energy era is upon us. One can't be blamed for thinking this is the same old song, just a different verse,” Dynamic Outcomes said.
The rand did not show any strength after the speech, and in fact, pushed higher to test R19 against the dollar on Thursday.
According to Anchor Capital, the SA markets closed in the red on Friday, after Ramaphosa’s speech and following losses in the mining sector.
The yield on benchmark government bonds rose on Friday. The yield on the 2030 bond advanced to 9.96%, while that for the longer-dated 2040 issue rose to 12.37%, the financial institution noted.
SOME GOOD NEWS ON THE HORIZON
South Africans can look forward to four interest rates cuts of 25 basis points each by the end of 2024, according to Standard Bank chief economist Goolam Ballim’s yearly economic outlook.
The predictions come off the back of easing inflation, with the Reserve Bank targeting 3% to 6%.
Standard Bank is forecasting an inflation rate of around 5% for 2024 and believes the Reserve Bank will begin interest rate cuts by the second quarter. This would mean that the repo rate would be down from 8.25% to 7.25% by the end of the year.
"We anticipate that it will mostly be quarter point cuts," Ballim said on Thursday.
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