Rand slumps to weakest level in months after Trump hits world with new tariffs

News24

21 hours ago

The rand hit R18.23/$ on Friday morning as the US currency continued to gain ground.
The dollar headed for its best week in almost three years against its major peers, maintaining momentum on Friday after US President Donald Trump imposed new tariff rates on dozens of trade partners, including 30% duties on SA products.
The US dollar index - which measures the currency against a basket of six major peers including the euro, yen, Swiss franc and Canada's dollar - is on course to rise 2.5% this week, its best weekly performance since a 3.1% rally in September of 2022.
On Friday, it rose 0.1% to 100.14, the highest since May 29.
The rand was also trading at its weakest level since May against the dollar. It lost more than 3% of its value this week. Apart from the trade turmoil, the currency also came under pressure after a local rate cut. US rates were kept unchanged this week. Lower interest rates make rand assets less appealing to traders seeking short-term returns.
Some countries fared much worse than others in tariff rates, hitting their currencies.
Canada received a 35% levy instead of an earlier threatened 25%, pushing the loonie down 0.12% to C$1.3872, its lowest since May 22 versus its U.S. peer.
The Swiss franc eased as much as 0.26% to 0.8120 per dollar after Trump set a 39% duty on Swiss imports, up from the 31% he previously mooted.
Among Asian currencies, the Philippine peso slumped to its weakest level in six months, while Taiwan's dollar hit its lowest since early June. South Korea, which got its trade deal late Wednesday, also saw the won swept up in the declines, with the currency falling to levels last seen in mid-May.
The euro remained pinned near an almost two-month low around $1.1412, as it continues to be weighed down by what markets see as a lopsided trade agreement with Washington. That wasn't far from Wednesday's low of $1.1401, a level not seen since June 10.
"In the short-term, you can make the case for more dollar strength," said Mike Houlahan, director at Electus Financial in Auckland. "The lion's share of the tariff news has washed through."
"The big move of the week has really been the euro getting rerated downwards," he said. "The net result would be the EU-U.S. trade deal is a further headwind for the euro."
The EU's framework trade agreement with the US, struck on Sunday, was quickly criticized by French leaders and the German head of the European Parliament's trade committee as being unfair for Europe.
The US dollar stayed strong even though Trump continued his attacks on Federal Reserve Chair Jerome Powell overnight, calling him a "terrible" Fed Chair and calling his own decision to appoint Powell to the position a "mistake".
Trump's repeated threats to fire Powell and calls for the Fed to drastically cut rates have put the central bank's independence in question, hurting the dollar in recent months.
The Fed shrugged off that pressure on Wednesday by holding policy steady, citing "somewhat elevated" inflation and a "solid" labour market.
A crucial economic test comes in the form of monthly payrolls data later in the day, with economists forecasting that employment growth slowed to 110,000 new jobs in July. Some analysts see that as a Goldilocks result, which would allow the Fed to resume rate cuts without sounding alarm bells.
"Data-wise, the US looks resilient," said Shoki Omori, chief desk strategist at Mizuho Securities.
"If the US economy is already operating above potential, that bump can translate into a slightly higher neutral rate of interest, which is supportive for front-end bond yields and therefore the US dollar," he said.