Markets WRAP: Rand closes at R14.03/$

The rand closed at R14.03 to the greenback on Wednesday afternoon following an eventful day.

The day's range was R13.94 to R14.32.

This as Finance Minister Tito Mboweni presented his maiden Budget address in Parliament. The rand initially plummeted during the first stages of Mboweni's address before recovering.

The rand see-sawed during Finance Minister Tito Mboweni's maiden budget speech on Wednesday afternoon. 

All roads over the past couple of weeks have led us to today's Budget Speech, says TreasuryONE's Andre Botha.

“D-day, or should we reference it as B-day is finally upon us. Yes, all roads from the past couple weeks have led us to the Budget speech which will happen this afternoon at 14:00.

"Minister Tito Mboweni has got to tread the line very carefully, especially when discussing the state of SOEs in the country and how to salvage them.

"There is some real concern that the budget could come across as weak and this could impact the rand negatively. Rating agencies will watch the developments quite closely and a bad budget will almost certainly see the vultures circling with regards to South Africa's credit rating.

"Overnight we have seen the US dollar on the back foot after some positive news from the US-China trade talks, and the release of the US Fed minutes later on today.

"The Fed minutes will give an insight into the extent of the US Fed's dovishness and how they plan to manage the interest rate of the US going forward.

"The rand touched the R14.00 level overnight but we expect a volatile day as the rand has a massive two-way risk with a bias to the top-side.”

South Africa's CPI inflation dropped to 4,0% in January 2019 from 4,5% in December 2018.

This is the lowest annual rate since March 2018, TreasuryOne said.

This was due to drop in petrol prices. The rand is currently trading at R14.10, eagerly awaiting this afternoon's budget speech. 

Economic D-Day has arrived for SA's Finance Minister Tito Mboweni.

Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions said in a morning note to clients that markets are expecting to see clarity and answers in terms of embattled state owned enterprises with the focus on Eskom, SAA, taxation, government's debt and wage bill.

"Minister Mboweni will aim to strike a balance in a very tough environment where stakeholders, such as ratings agencies and unions, are at odds about what the budget should contain," she said.

"Local CPI is due for release today with the expectation for the headline number to come in at 4.3%.

"We expect volatility throughout the day with a technical range of R13.98 to R14.28."

Meanwhile, Botes said the reaffirmed dovish stance of the US Federal Reserve saw the euro rebound off a 3-month low against the dollar and the rand gaining momentum against the greenback.

This, coupled with positive comments from President Trump regarding the trade talks, gave the local currency a welcome boost, opening at R14.01/$ this morning.

By 09:13, the rand was changing hands at R14.07/$.

The rand is trading at R14.06 to the greenback ahead of Finance Minister Tito Mboweni's Budget speech today.

In a morning note to clients, TreasuryONE said all eyes were on Mboweni.

"Markets will be looking at the usual expenditure versus revenue numbers but more specifically the bailouts for Eskom, SAA and SABC and where the money will come from.

"Growth numbers, SARS, taxes and borrowings will also be in focus. Look out for the ratings agencies reaction after the speech."

The rand has also firmed against the dollar in line with other emerging market currencies.

"The dollar fell against most currencies overnight on renewed optimism of a China US trade deal and an expectation that the Fed minutes to be released later today would show a dovish stance,"said TreasuryONE.

"The DXY dollar index fell to below the 97.0 level and is currently at 96.53. The pound has risen further to 1.3065 on some Brexit optimism whilst the euro is at 1.1346. US Treasury yields slipped ahead of the Fed minutes and we have the 10 and 30 year bonds at 2.64% and 2.98% respectively.

"Gold rose sharply to $1 343.15 while Palladium rose to a record high of $1 500.05."