Who would have thought that we were at R14.40 only a couple of days ago? Quite a lot has changed in the interim as the market had an adverse reaction to the SA budget speech, on second thought as the Rand was the worst-performing EM yesterday. A second wave also hit the EM market yesterday as US Treasury Yields spiked to 1.60%, which put further pressure on EM currencies. Have a look at the US 10Y treasury yield chart showing the spike.
A third factor is that the US dollar started to claw back some of its losses over the past couple of days and has filtered through into the EM market. The result of the three factors is that we walk in this morning with the Rand breaching the R15.00 level and looking vulnerable with a bit more weakness expected.
The fallout from the US Treasury Yields also resulted in the Commodity market selling off with all commodities starting the day in the red. Gold is currently trading at $1,758 per ounce, Platinum at $1,210 and Palladium at $2,382. Brent Crude is also trading a little softer this morning at $ 66.14 per barrel.
Overnight we have seen the US dollar clawing back against the Euro and is currently trading at 1.2155 after comfortably trading over the 1.2200 level yesterday. Yesterday, we saw the US Markets deep in the red as the Dow Jones and S&P 500 traded down by 1.5% and 2.5%, respectively. Asian markets this morning is also struggling with the Hang Seng and the Nikkei down by 2.85% and 3.65%. It is evident that the market is currently “risk-off”, and should this push through to the currency space, we could see EM’s on the back foot during today’s trading. Exporters should see these levels as good entry points for commitments.