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Rand firms on easing trade tensions, equities down

The South African Revenue Service will publish July trade balance numbers on Friday.

The rand firmed in afternoon trade on Monday as the United States and China sought to ease trade war tensions while investors also looked to a slew of domestic economic data later in the week for clues on the health of the economy.

With global markets increasingly twitchy over developments in the bitter trade war between the world’s two largest economies, Beijing on Monday called for calm and US President Donald Trump predicted a deal between the two sides.

At 1510 GMT the rand was 0.67% firmer at R15.19 against the dollar.

“The rand tested the R15.45 level this morning during the major sell-off, but markets seemed to calm down later as the market took a breather after conciliatory remarks from both the US and China while fresh US-Japan trade optimism also helped ease some nerves,” TreasuryONE senior currency dealer Andre Botha said in a note.

The rand has suffered in August, sliding more than 6% as local pressures linked to the growing chance of a credit downgrade to junk by Moody’s, and uncertainty offshore, have stalled any long bets on the currency.

Africa‘s most industrialised economy relies on exports to China and the United States for a bulk of its revenue, and the deepening spat between the two risks denting the country’s already dim economic prospects.

The South African Revenue Service will publish July trade balance numbers on Friday.

“While a trade surplus in July will be supportive of economic growth, all eyes will be on the import and export figures. Any signs of global trade tensions reducing demand for South African exports will be negative for the rand,” said Lukman Otunuga, a senior research analyst at FXTM.

On the bourse, stocks clawed back some territory but still closed weaker, with sentiment still fragile amid uncertainty over the US-China trade war.

The Johannesburg All-share index dipped by 0.3% to 53,812 points, while the benchmark Top 40 index fell 0.4% to 48,043 points.

Petrochemicals company Sasol declined 1.9% to R266 after it reduced its 2020 core earnings target for the Lake Charles Chemicals Project (LCCP).

Among the fallers, Spar shed 1.9% to R167.93, grocer Shoprite was down 1.9% at R114.13 and Woolworths closed with a 1.5% decline at R51.34.

In fixed income, the yield on the benchmark paper due in 2026 fell by a single basis point to 8.265%.

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