South Africa’s rand is now trading below the key R16 to the dollar level, buoyed by the prospects of a Joe Biden win against Donald Trump in the closely contested 2020 US presidential race.
The rand hit R15.83 to the greenback at around 20:35 on Wednesday night, its best level since the first week of March. It eased a bit to around R15.87 later – but was still trading over 1% stronger against the dollar on the day.
It was a seesaw day for the currency after it first broke through the R16 level to the dollar on Tuesday.
The rand weakened some 2% in morning trade on Wednesday to R16.40 to the dollar at 09:50. However, it ended the day stronger and is likely to strengthen further this week if Biden wins.
A Biden win is expected to see the dollar weaken as he has promised a larger Covid-19 US economic stimulus package. The Democrat leader is also anticipated to end Trump’s trade war with China.
“It is expected that a Biden win would most likely bring some stability versus the erratic behaviour we have come to know from Trump, and, as a result, support riskier assets,” said Bianca Botes, executive director at Peregrine Treasury Solutions.
“A sustained break below R16.00 will open the door for the next big technical level of R15.75 [against the dollar],” she added.
“In the near term, however, we can look to more volatility until the election result is confirmed and certainly there will be greater instability to come if the election is contested by Trump,” noted Botes.
The rand touched R15.82 to the dollar on Thursday in mid-morning trade but continued to fluctuate around the R15.85 range.
Andre Botha, a senior dealer at TreasuryONE said in a note on Thursday morning that the dollar “is trading mixed” but “mainly a touch weaker with emerging market currencies very much on the front foot”.
He expected the rand to continue to track the rest of the emerging market moves against the dollar until there is certainty over the US election outcome.
“Joe Biden appears to be edging closer to winning the US presidential election as he needs only to win in Nevada to clinch the 270 electoral college votes required. However, Donald Trump is launching numerous legal challenges contesting the results in various states, which could delay any final confirmation of the election outcome for some days, and we could still see some volatility in markets,” said Botha.