Rand Holds Near R16.08 as Dollar Slips on Treasury Move

Good morning

The wait is almost over!!!  After watching the All Blacks dismantle our regional rugby franchises over the past few weeks, tomorrow we will finally see the start of this rugby tour proper, and hopefully they’ll come up against a Springbok side far superior to any of the teams they’ve faced so far.  GO BOKKE!!!

These are the mid rates at 5:50 today:

USD = R16.08	AUD = R11.49
GBP = R21.97	DXY = 98.76
EUR = R18.81	Brent Crude = $93.53 per barrel

Market News

• Things have also been somewhat exciting in the currency market as just when we were gearing up for a week without any major US data releases, we then got a surprise announcement from their Treasury department on Wednesday, an announcement that had an immediate impact on price action.  The good news is this development was Dollar negative, with our exchange rate surging to R16.07 to the Dollar, gains that we have held onto as we go into today at R16.08. 
• The week, while not overly problematic, was proving to be a challenge for the Rand as the market was focused on worsening headlines out of the Middle East, which drew Dollar support as a safe haven asset while slowly pushing our exchange rate up to R16.28.  The 60-day memorandum of understanding between the US and Iran expired early in the week, and rather than being replaced with the next form of ceasefire, we had both sides ramping up their rhetoric on how the next phase of the war is about to become more hard-fought.  Brent Crude has kept climbing as a result; it now sits at $93/barrel, while the Rand came under mild pressure. 
• But then out of nowhere, US Treasury Secretary Scott Bessent announced that his department would double their long dated treasury buy-back program from $2bn to $4bn per operation between September and November, and this caught the market’s attention in no uncertain terms.  US 30-year treasury yields have steadily moved higher over recent months for various reasons, one being concerns around the size of their government debt, which topped $40trn for the first time on Wednesday, and with long-dated yields directly impacting things like mortgage rates as well as government debt financing costs, Bessent stepped in to try to alleviate some pressure. 
• Bessent’s move achieved his target with this unexpected increase in demand for US treasuries resulting in the 30-year yield falling from a 19-year high of 5.34% to 5.18% in double quick time, but his announcement also reignited fears about the sustainability/fragility of the US fiscal picture, and that was Dollar negative.  The Dollar Index fell from 99.45 to 98.78 in an instant, a move that saw the Rand hit R16.07, and with the greenback failing to make much of a recovery since then, that means the Rand remains within touching distance of R16.00 and below. 
• The following from Reuters suggests that the market is seeing Bessent’s move as more of a Band-Aid than a proper solution, one that could weigh further on the Dollar:  The Dollar was on shaky ground and set for a weekly loss on ​Friday as investors viewed the US Treasury’s bond buyback gambit as merely a temporary fix. “The Treasury’s long bond buybacks are basically another example of the US government using unconventional tools to manage borrowing costs, and this comes ​against the backdrop of high government debt, growing fiscal deficits and policy uncertainty,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia. “So ​I can understand why people are concerned about the operation being another headwind to investor sentiment around US Dollar assets. Potentially we could see such an action ‌encourage more ⁠Dollar hedging and diversification.”
• No local market data today. 
• Possible USD mid rate trading ranges in the Rand today are R15.95 and R16.25.

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