Rand firms to R15.33/$ on positive sentiment over Biden’s victory, Newsline

JOHANNESBURG – The rand rallied to yet another best performance in months yesterday as financial markets welcomed the possibility of a new Covid-19 vaccine and the near clean sweep of the Democrats in the US elections.

The rand rose 0.43 percent and reached R15.33 against the dollar as market sentiment was boosted by Democrat Joe Biden’s victory, with both the House and presidency under the control of the Democrats and almost a tie with the Republicans in the Senate.

Stocks were also enjoying their best week since April, with the FTSE/JSE All Share Index surging 1.63 percent to close at 57 307 points and the Top40 Index 1.56 percent up at 52 684 points.

Banking stocks led the charge at the JSE, rising 8.89 percent to 6 141 points, followed by general retailers, which were 3.57 percent stronger at 4 390 points.

FirstRand surged 12.32 percent to R44.75, Nedbank 9.77 percent to R118, Standard Bank 7.34 percent to R120, while Absa was 7.2 percent higher at R98.73 per share.

Yesterday, US drug-maker Pfizer said its experimental Covid-19 vaccine was more than 90 percent ready.

“Today is a great day for science and humanity,” said Albert Bourla, Pfizer’s chairperson and chief executive. “We are reaching this critical milestone in our vaccine development programme at a time when the world needs it most, with infection rates setting new records, hospitals nearing over-capacity and economies struggling to reopen.”

Biden is expected to pass a fiscal support package for the US economy close to a massive $2.2 trillion (R28.05trln), which was anticipated prior to the elections.

He is also expected to strengthen the fight against Covid-19 as cases were surging by more than 100 000 daily, thus reducing the risks to other economies.

Old Mutual’s chief economist, Johann Els, said that the Biden victory would be positive for South Africa and create a more stable policy environment.

Els said that expansionary fiscal policy, combined with a very dovish US Federal Reserve, will enhance the probability of a weaker dollar. “A weak dollar is great for emerging economy currencies – and thus for the rand,” Els said.

“The Biden win thus strengthens my view of a strong rand exchange rate in the short term, despite weak local fundamentals. Thus, in the short term, the rand exchange rate will be determined by global factors more than by local issues.”

Investec’s chief economist, Annabel Bishop, said the dollar was weak on market belief that the Democrats would see a relatively easy path for fiscal and legislature proposals.

Bishop said South Africa was a particular loser of foreign purchases of its debt up to October, but these outflows had ceased this month, as strong foreign investor risk-taking in the face of an expected improved global growth outlook.

She said the rand had staged a strong recovery this year, from close to R19.35 to the greenback at the height of the Covid-19-induced financial market panic. But it was still off R14.01 at the start of the year.

“This quarter to date, the rand averages R16.35, but with over half the quarter to go, and South Africa in line for credit rating downgrades next week, the highly volatile domestic currency will not necessarily stay at current levels,” she said.