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Rand weakens as dollar strength bites

The rand was amongst the worst performing emerging market currencies in April and has remained weak in May.

Picture: EWN

JOHANNESBURG - South Africa’s rand weakened against the dollar in early trade on Monday as the greenback stayed near its 2018 peak after US jobs and wages data did little to temper perceptions of strength in the US economy.

At 0645 GMT, the rand traded at 12.5700 per dollar, 0.48% weaker than its close on Friday.

The rand was amongst the worst performing emerging market currencies in April and has remained weak in May with the dollar, lifted by rising US Treasury yields, climbing to its highest levels this year against a basket of currencies.

“The US dollar strength observed since the beginning of May is testing emerging market resilience. South Africa and Turkey are both vulnerable due to high financing needs,” Rand Merchant Bank analyst Isaah Mhlanga wrote in a note.

He added: “We expect trade tensions and Nafta (US, Mexico and Canada) trade talks to negatively impact the rand, therefore we do not expect meaningful gains this week.”

Stocks were set to open higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.23%.

In fixed income, the yield for the benchmark government bond due in 2026 fell 1.5 basis points to 8.33%, reflecting firmer bond prices.

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