South African Rand coins are seen in this illustration picture taken October 28, 2020. REUTERS
JOHANNESBURG, March 5 (Reuters) – The South African rand weakened in early trade on Thursday, slipping back below 16.40 against the U.S. dollar as high oil prices and risk aversion pressured South Africa’s terms of trade and capped any meaningful recovery.
At 0814 GMT the rand traded at 16.4975 against the dollar , about 1% down from its previous close.
- The South African rand has lost around 4% since the beginning of the week, causing USD-ZAR to move significantly away from the 16-mark for the time being to currently trade around the 16.5 level.
- “The ZAR is back below 16.40, while the gold price remains elevated, helping the ZAR find its footing. Unfortunately, oil prices remain well elevated, which will keep SA’s terms of trade under pressure and prevent the ZAR from fully recovering,” said ETM Analytics in a research note.
- Commodity prices have been acting as a tailwind, as key South African export gold which is rising on global markets on the back of safe haven demand.
- The Johannesburg Stock Exchange’s Top-40 index was down 0.5% in early trade.
- South Africa’s benchmark 2035 government bond also fell in early deals, as the yield rose 4 basis points to 8.265%.
- Andre Cilliers, Currency Strategist at TreasuryONE said he expects the rand to remain susceptible to geopolitical developments in the short term.
Reporting by Anathi Madubela;Editing by Elaine Hardcastle
