The rand softened yesterday as the recent risk optimism was tempered somewhat by weaker Chinese trade data and a bounce in the US dollar.

The local currency eased by 0.2% to R18.41 by 5pm against the US dollar, from the previous close of R18.29/$1 on Monday.

Markets were digesting data showing Chinese exports fell more than expected in October, clouding the demand outlook in the world’s top crude importer.

Moreover, oil prices came under pressure recently, losing nearly 6% last week, amid growing optimism that the Israel-Hamas war could be prevented from spreading through the Middle East and disrupt oil supply from the region.

The price of Brent Crude fell to a 10-week low of $78 per barrel yesterday after rising slightly on Monday as top crude producers Saudi Arabia and Russia reaffirmed their commitment to additional voluntary oil supply cuts until the end of the year.

TreasuryONE currency strategist Andre Cilliers said a pullback and some consolidation were expected in the rand, given its recent strong rally.

Cilliers said the weakened Chinese trade data and a firmer greenback had weighed on commodity prices, thus affecting the rand.

“Global growth concerns have resurfaced after China’s trade data disappointed once again. Gold is down 0.3% at $1 972, while platinum and palladium have lost around 0.5%,” Cilliers said.

“Base metals have also opened weaker this morning, with copper, nickel, and aluminium all down by over 0.5%. Brent Crude has slipped below the $85.00 (R1 609) mark as demand concerns offset the Saudi and Russian supply cuts.”

Investors were also digesting some hawkish remarks, particularly as Minneapolis Federal Reserve President Neel Kashkari warned that the central bank may not be done raising rates.

“Under-tightening will not get us back to 2% in a reasonable time. We need to let the data keep coming to us to see if we really have got the inflation genie back in the bottle, so to speak,” Kashkari said.

Citadel Global director Bianca Botes remarked that trade saw the rand weakened overnight against its major peers after briefly touching R18.17/$ in Monday’s trade.

“Overnight comments from Fed officials struck a more hawkish tone, which saw Treasury yields rebound and the greenback rally,” Botes said.

“Markets now await more remarks from Fed Chair, Jerome Powell, on Wednesday and Thursday where the focal point will be on whether the US central bank will maintain its more dovish stance."

Meanwhile, the JSE all share index was more than 1% down around 72 400 points yesterday, on profit-taking following a four-session rally buoyed by optimistic expectations regarding the peak of interest rates.

Worries persist about South Africa’s deteriorating fiscal situation.

Ratings agency Fitch raised concerns over South Africa’s rolling power cuts, rail freight challenges and ability to meet fiscal targets announced in the mid-term budget last week.

BUSINESS REPORT