South African rand gains as markets process Trump's policies
JOHANNESBURG, March 5 (Reuters) - South Africa's rand gained on Wednesday, capitalising on pressure faced by the U.S. dollar as markets digested the impact of U.S. President Donald Trump's policies.
At 1505 GMT, the rand traded at 18.37 against the dollar , about 0.5% stronger than its previous close.
The dollar hit three-month lows on Wednesday as the U.S. trade war with its partners developed. It last traded about 1% weaker against a basket of currencies.
The Trump administration will make an announcement later on Wednesday regarding U.S. tariffs imposed on Canada and Mexico as Trump weighs potential relief for some sectors such as automobiles, the U.S. Commerce Department chief said.
"As the dollar has come under broad-based pressure, the rand and other emerging market currencies have capitalised," said Danny Greeff, co-head of Africa at ETM Analytics.
Greeff said Trump's policies look to be accelerating the global business cycle towards a downturn and while any consequent sell-off in global equities would hurt higher-risk assets like the rand, the Federal Reserve's expected response would drive U.S. Treasury yields lower and eventually support risk appetite.
"It's a matter of timing these dynamics right, and, for now, it seems the market is struggling with that," Greeff added.
Like other risk-sensitive currencies, the rand often takes direction from global drivers like U.S. policies in addition to local factors.
The domestic economic data calendar was light on Wednesday, the only major release being February's whole economy purchasing managers' index (ZAPMIM=ECI), opens new tab survey, which showed business activity continued to weaken but that the pace of contraction slowed.
Next week investors will focus on South Africa's delayed national budget. South Africa's national budget was postponed last month because the two biggest parties in the ruling coalition disagreed over raising value-added tax.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index (.JTOPI), opens new tab closed up about 1.2%.
South Africa's benchmark 2030 government bond was little changed, with the yield at 9.03%.
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