Early Rand gains lead to steep declines on the back of trade war

The Rand opened higher on Monday against both the Pound and the greenback, trading at 17.356 against the Pound Sterling and 13.345 against the greenback. It then continued to appreciate against major currencies on Tuesday to a high of 13.266 to the Dollar, as gains in the Chinese stock market spilled over to other emerging market economies. This, in turn, spilled over to the rest of the ASEAN economies, allowing for stronger emerging markets early last week.

The Rand ranged for most of Wednesday as volatility took hold and steam in the emerging market economies ran its course. This lasted until mid-Thursday when the Rand, along with other emerging market currencies (especially the Turkish Lira) started losing strength against major currencies. The continued impact of the global trade war remains a pressure point for emerging markets and continues to provide downward momentum on the Rand. These dynamics forced the Rand to close at 14.11 against the Dollar and at 17.99 against the Pound Sterling on Friday.

Volatility against the major currencies picked up again yesterday, when the greenback peaked at R14.48 in the morning and subsequently lost ground against the Rand (costing R14.21) by 14:00. This can be attributed to the impact of the meltdown in the Lira, as it continues to weigh down on emerging market currencies. Positive economic data from the US and Britain on Friday drove some strength into the Pound and the Dollar, which further added to the Rand’s (and other emerging market currencies’) woes, perpetuating market volatility.

Date	What’s happening	Why it’s important
Tuesday 14 August	·         China industrial Production ·         Britain Employment Data ·         EU GDP	·         Higher production can be indicative of higher import rates (support for emerging market/partner countries such as SA) ·         Indicative of economic strength – higher jobs data improved economic outlook and currency sentiment ·         Strength of the EU economy. Influences the strength of the Euro
Wednesday 15 August	·         Britain Inflation Data	·         Directly impacts the strength of the Pound relative to other currencies
Thursday 16 August	·         Turkish Industrial Production	·         Indicative of the strength of the Turkish economy and its ability to absorb impacts from the trade war with the US
Friday 17 August	·         EU Inflation Data	·         Fundamental strength and outlook of the Euro

– Justin Fortuin