Weaker Rand

Wealth

Weaker Rand

The rand lost almost 3% in value against the US dollar in the past week, mainly because of weaker than expected growth numbers and a general selloff in emerging market currencies.

The JSE closed the week stronger, as emerging market currencies led by the rand tumbled against the greenback. The rand lost almost 3% in value against the US dollar in the past week, mainly because of weaker than expected growth numbers and a general selloff in emerging market currencies.

Statistics SA announced on Tuesday that South Africa’s real gross domestic product (GDP) fell by 2.2% in the first quarter of 2018. This followed a quarter-on-quarter increase of 3.1% in the fourth quarter of 2017, with overall growth for 2018 at 1.7%. The largest negative contributors to GDP growth in the first quarter were the agriculture, mining and manufacturing industries. On the positive side, the financial, government, business services and real estate sectors all made positive contributions.

The weaker rand supported the equity market and rand hedge counters soared. The JSE all-share index (alsi) closed the week 1.67% higher. The industrial sector closed 2.29% in the green, while the resources sector closed a massive 5.08% higher. The financial sector lost 2.17% in value because of the weaker currency.

The rand not only performed negatively against the US dollar, but also lost nearly 4% against the euro and 3.5% against the British pound.

On the international front, the purchasing managers’ indices (PMIs) released over recent weeks indicate that US growth continues to outstrip that of Europe. The US composite PMI, which includes both the manufacturing and service sectors, rose to 56.6 in May.

The European Central Bank (ECB) is expected to announce the end of quantitative easing (QE) on Thursday. The move may come in response to recent market turmoil and the formation of Italy’s new anti-establishment government.

Major international news for this week is US president Donald Trump’s meeting with his North Korean counterpart, Kim Jong‑un, in Singapore to discuss the denuclearisation of the Korean Peninsula. This could pave the way for lasting peace on the Korean Peninsula.

 

Regards,

SECURITAS – Wealth Management