By Matthew le Cordeur, Fin24
Cape Town – Pressure on the rand seemed to ease on Monday, after the market overreacted to an African National Congress policy motion last week that could see the nationalisation of the South African Reserve Bank (SARB).
The rand, which hit R13.50 to the dollar last week, was trading 0.24% firmer at R13.34 to the greenback at 09:00 on Monday. NKC African Economics expects the range to swing between R13.15/$ and R13.45/$ on Monday.
“The general feeling among clients we have spoken to is agreement that the markets overreacted to the SARB nationalisation talk,” Rand Merchant Bank analyst John Cairns said in a note on Monday.
“The Public Protector’s order on the SARB’s powers, meanwhile, is facing increasingly harsh opposition as even Speaker (Baleka) Mbete has decided to join the court challenge. However, none of this has filtered through into local markets as the rand, bonds and even CDS continue to languish.”
The nationalisation of the SARB is seen as purely symbolic as most countries have nationalised their reserve banks. However, in the light of the Public Protector’s remedial action to change the Constitutional mandate of the SARB, it was seen as a further attack on the institution.
While the pressure on the rand appears to be easing, Cairns warned that offshore pressures continue to mount.
He pointed to strong US non-farm payroll figures as well as Federal Reserve chairperson Janet Yellen’s semi-annual address to Congress on Wednesday.
“She is broadly expected to guide the market towards expecting the Fed balance sheet unwind to begin in September.”
