Rand rally sputters as Trump tweet triggers sanctions fears

*
A display hangs showing a commemorative South African 100 rand banknote in Pretoria, South Africa on July 13. The currency, the third-biggest decliner in emerging markets in the past three months, dropped as much as 1.9% against the dollar, the most among its peers, after US President Donald Trump said he asked Secretary of State Mike Pompeo “to closely study the South Africa land and farm seizures and expropriations.”
The rand halted a four-day winning streak after US President Donald Trump tweeted about South Africa’s land politics, sparking concern the country may become the next target for US sanctions.The currency, the third-biggest decliner in emerging markets in the past three months, dropped as much as 1.9% against the dollar, the most among its peers, after Trump said he asked US Secretary of State Mike Pompeo “to closely study the South Africa land and farm seizures and expropriations”.  The yield on the country’s benchmark local-currency bond due 2026 climbed 3 basis points to 8.94%, while the benchmark FTSE/JSE All Share Index gained 0.1%.

Trump’s sudden interest in the South African land-reform debate comes at a time when President Cyril Ramaphosa’s government, heading for an election next year, grapples with waning demand for emerging-market assets amid concern about trade wars and reduced stimulus in the developed economies. “The rand is a very volatile currency and President Trump for some reason turning his attention to South Africa is clearly unwelcome,” said Chris Turner, the head of foreign-exchange strategy at ING Groep NV in London. The currency was 0.7% weaker at 14.2657 per dollar 1.19pm Johannesburg time, having traded at 14.4431 earlier.

South Africa’s Department of International Relations and Cooperation said it was set to meet with the US embassy yesterday “to seek clarification on the matter.” Trump’s comments were “unfortunate” and based on false information, it said in a statement. The government earlier tweeted that it “totally rejects this narrow perception which only seeks to divide our nation.” South African Deputy President David Mabuza told farmers at a meeting yesterday near Bela Bela, in Limpopo province north of Johannesburg, that land restitution “will be done within the confines of our constitutional framework.”

“The rand is still in its trading range albeit at the upper end of it, between 14.20 and 14.50 to the dollar,” said Tony can Dyk, a currency dealer at TreasuryOne. “Trump’s tweet on the land issue has been negative for the rand but we have to wait and see what comes out from that.”

Sources and photo-credits: Gulf Times, Bloomberg