The New York Stock Exchange (NYSE) in New York City, US. US President Donald Trump’s statements are causing volatility in the stock markets. Photo: Reuters
Nicola Mawson
US President Donald Trump’s early Monday morning announcement that he would stop providing aid to South Africa following the signing into law of the Expropriation Act towards the end of last month sent the rand into a tailspin.
In an address to the media, Trump said he was singling South Africa out on the continent due to the new law. “Terrible things are happening in South Africa ... they're confiscating land and actually they're doing things that are perhaps far worse than that."
The rand went through R19 to the dollar at midnight on Monday, before settling somewhat at the top end of the R18 to the dollar range. The local currency regained ground and was pegged at R18.74 to the dollar at 6pm.
Anchor Capital’s CEO, Peter Armitage, speaking during a webinar on Monday, said that “one of the things that surprised us this morning was how surprised people are”. He said Trump’s “bluster” had made the dollar stronger, and if he hadn’t been elected, the currency would likely be trading in the range of R16 to R17 to the greenback.
During the same webinar, the head of fixed income at Anchor Capital, Nolan Wapenaar, said the volatility in the markets will just be “just part and parcel of investing” over the next few years. The only meaningful grant from the US to South Africa is about R8 to R10 billion for HIV/Aids. “It’s not meaningful in its own right,” and doesn’t justify the market’s reaction,“ he said.
South Africa’s gross domestic product is currently worth some R377.8 billion, with the HIV/Aids funding – as a dollar amount – making up a maximum of 0.14% of the worth of the local economy.
Bianca Botes, a director at Citadel Global, said in a note that investors should “hold on to your hats and expect significant volatility as the day and week unfolds”.
Concurring with Botes is Old Mutual’s chief economist, Johann Els, who told Business Report that the “volatility is the name of the game”. He noted that this disruption in the local currency will be because of a stronger dollar, with the currency likely to be unsettled for the “next year or so”.
However, Els doesn’t anticipate volatility to have a lasting impact, and he expects the rand to settle at around R16 to R17. South Africa will, he said, benefit from investment rating upgrades within the next two to four years, which is “rand positive”.
Annabel Bishop, Investec’s chief economist, said that the local currency had weakened “modestly” on Trump’s announcement. She added that, “under the prior Trump administration, substantial protectionism slowed global growth and trade, weakening the rand and creating risk-off sentiment,” and markets were now expecting a similar environment.
In November last year, Investec changed the rand’s forecast trajectory after the US election outcome to end this year at R17.60 instead of R16.50 as well as altering the expectation to R17.50 by end of 2026, instead of R15.60.
Andre Cilliers, a currency strategist at TreasuryONE, noted that amid tariff threats that will affect countries across the globe, internationally, stocks are set for a sharp selloff due to rising uncertainty. He explained that investors were seeking safety in the dollar as well as gold.
Li Xing, a financial markets strategist consultant to Exness, said crude oil futures were also experiencing volatility, initially rebounding after Trump announced tariffs on Canada and Mexico, raising concerns about potential disruptions to oil supply from these major U.S. suppliers.
She added that, while the tariffs may cause inflationary pressures, they could also dampen global demand for crude due to higher costs.
BUSINESS REPORT