Concerns surrounding rising infections in Europe – and a return to more strict lockdown measures – amplifying the contagion effect of the Turkish lira’s plunge, led to a weakening in the South African currency on Friday, according to Oxford Economics Africa.
The impact of risk aversion outweighed support lent by Thursday’s rate lift-off, as the South African Reserve Bank (SARB) opted to raise the repo rate for the first time in three years. Markets shifted sharply after Austria announced plans for a nationwide lockdown and mandatory vaccinations amid rising coronavirus cases, while the German health minister said Germany also can’t rule out a lockdown.
The risk-off shift in response also brought about a rethink of Fed rate hike expectations; Fed funds futures were fully pricing in a rate hike by July earlier, but that probability has fallen to 85 percent since.
At the close of local trade, the rand quoted 0.38 percent weaker, at R15.68/$, after trading in range of R15.55/$ to R15.75/$. The rand traded on the back foot overnight. The expected range of the rand against the dollar today is R15.50/$ to R15.80/$.
Brent crude oil
The threat to economic recovery from the surge in Covid-19, together with anticipated lockdowns in European countries, saw crude prices fall back on Friday. At the close of local trade, the Brent oil price quoted 3.0 percent lower at $79.4/pb. Crude prices traded lower over the weekend and prices ticked marginally higher during Asian trade this morning.
BUSINESS REPORT ONLINE