Markets worried; China’s Evergrande, Rand tests R15/$ mark.
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On Monday, the rand tested the R15/$ level in mid-morning trade. According to the Bureau for Economic Research (BER), the local unit lost 0.7 percent against the dollar last week on a week over-week basis. It finished the week 1.7 percent lower against the euro and the pound.
It began Monday at R14.89 and climbed to R14.99 against the US dollar at one point. Treasury ONE currency strategist André Cilliers noted the rand was trading “a touch softer” on Monday amid concerns over Chinese property developer, Evergrande, resurfacing. “Investors have turned cautious once again after trading in Evergrande shares was suspended this morning,” Cilliers said.
Hopson Development Holdings, whose stock was also halted, intends to purchase a 51 percent stake in Evergrande. The deal is estimated to be worth more than $5 billion.
“Markets will be watching the Evergrande developments closely, but this week’s big factor will be Friday’s payrolls and unemployment numbers,” said Cilliers. According to Bianca Botes, director at Citadel Global, a decrease in the number of Americans making new unemployment benefits claims indicates that the US economy is improving.
Commodities are another something to keep an eye on. “Higher commodity prices promote exports, and South Africa remains strong in this regard,” Botes noted, “but Eskom’s recently stated intention to shifting from coal to renewable energy could have an impact on coal mining demand in the long run.
“The rand was supported last week by export commodity prices, according to the BER, with the price of Richards Bay coal jumping over 30% to over $200 per tonne. “A domestic coal supply crunch in China and surging natural gas prices in Europe has driven up the demand for coal in recent weeks.
“In terms of local export earnings, the much higher coal price (up by 130% so far in 2021) should help to counter the likely loss of export revenue from, amongst others, the declining iron ore price,” the BER said.
Story By: Norvisi Mawunyegah