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.
This article first appeared in Moneyweb and is republished with permission.
