CAPE TOWN – The rand breached the R16/$ mark against the dollar on Wednesday, touching R15.97/$ during intraday trade on the back of a widening gap in the US presidential race between Donald Trump, with Biden leading the charge.
On Tuesday the greenback rebounded from a one-week low as the polls slowly trickled in for counting, showing that Trump and Biden were neck and neck.
At 5pm the domestic currency was bid at R16.02 a dollar, R18.76 to the euro and R20.80 versus the pound.
TreasuryONE currency dealer Andre Botha said with all the volatility going on in the market, anything was possible. “We will need to keep a close eye on what happens. If the US election does not get a clear winner and becomes contested, then we could be in for a rough ride.”
Schroders chief economist Keith Wade did not rule out the prospect of a continuation of the status quo, with a Trump presidency and divided Congress saying this was an outcome that would see less stimulus and the re-ignition of the trade wars, factors that would limit growth.
“Markets, which had begun to factor in a Democrat sweep and a significant stimulus bill, are now reining in their growth expectations. Estimates had suggested this could have been worth an extra 1 percentage point of growth in the US next year,” said Wade.
Peregrine Treasury Solutions executive director Bianca Botes said it was 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.
She said a sustained break below R16/$ would open the door for the next big technical level of R15.75/$ for the domestic currency.
“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,” said Botes.
For now, no clear result is probably the worst possible outcome from an economic perspective as uncertainty increases and stimulus hopes fade.