Africa-Press – South-Africa. A day after breaking through to below R19/$ for the first time in almost a month, rand strength continued with a sustained break below R18.90. While it is still far off its levels (around R18.30) before the Russian arms crisis, it has now gained more than 4% over the past week.
On Thursday afternoon, the rand was trading at R18.84.
Investec chief economist Annabel Bishop says the currency could run stronger towards R18.75/$, although it is hitting key resistance levels.
On Wednesday, the rand received a boost amid news that South Africa might discuss moving the BRICS summit to China, said Anchor Capital in a note.
News24 reported that the Department of International Relations and Cooperation (Dirco) is believed to have given the green light to move the summit to China.
The International Criminal Court (ICC) has issued a warrant for Russian President Vladimir Putin’s arrest on charges related to the alleged unlawful deportation of children from Ukraine to Russia. As an ICC signatory, South Africa would be obliged to arrest Putin.
A week ago, the rand hit a record low (R19.91) following South Africa’s decision to provide diplomatic immunity to Russian delegates (potentially including Putin) at the summit in August.
The local currency has been on a crash course since the US accusation that Russia received arms and ammunition in South Africa early in May.
According to Bishop:
Investors are also concerned about the prospect of Western sanctions against South Africa, with the SA Reserve Bank warning of severe disruption if SA ends up being locked out of the SWIFT international payment system.
Bishop says current lower levels of load shedding have also bolstered the rand, along with the news that electricity minister Kgosientsho Ramokgopa is seeking “a special dispensation” for Eskom to cut out middleman activity and procure directly from original equipment manufacturers.
Bishop says:
On Thursday, dollar weakness also helped the rand to sustain its advance.
The US currency was weaker against its major peers, including the euro – despite the news that the eurozone economy slipped into a mild recession in the first quarter, Reuters reported.
A view among investors that the US two-year bond yield had potentially peaked was weighing on the dollar, Simon Harvey, head of FX analysis at Monex Europe, told Reuters.
Economic news out of South Africa has also been relatively positive this week, with new GDP numbers showing a recession has so far been averted.
On Thursday, it was also confirmed that South Africa’s current account narrowed in the first quarter – economists were expecting a deterioration. The much better-than-expected performance was largely thanks to strong exports.
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