The South African rand fell after President Donald Trump’s announcement to cut federal funding, amidst disappointing U.S. job creation data. The dollar weakened as expectations for interest rate cuts by the Federal Reserve increased. Despite this, the rand had earlier gained nearly 3% over the past week. South Africa’s net foreign reserves also showed an increase.
On Friday, the South African rand depreciated following United States President Donald Trump’s declaration to terminate all federal funding to the nation. Concurrently, the dollar weakened as recent employment data indicated the U.S. economy added fewer jobs than anticipated last month.
At 1519 GMT, the rand was trading at 18.21 against the U.S. dollar, marking a 0.3% decline from its previous close. Earlier in the day, it had fallen approximately 1%. Despite this downturn, the rand has appreciated nearly 3% against the dollar since last Friday, as markets absorbed the implications of Trump’s tariff policies.
The dollar index showed a decline of about 0.5% against a basket of currencies after disappointing job creation figures for February raised expectations that the Federal Reserve might lower interest rates later this year.
In a post on Truth Social, Trump stated that the U.S. would cease all federal funding to South Africa. He also mentioned that South African farmers facing safety issues would be considered for expedited citizenship in the U.S.
“This negative sentiment surrounding South Africa and Trump’s rhetoric continued to weigh on the rand,” remarked Wichard Cilliers, head of market risk at TreasuryONE. Trump was likely alluding to previous claims that land confiscation in South Africa was unfairly targeting specific populations, referencing a law aimed at rectifying racial inequalities in land ownership.
Moreover, his administration enacted an executive order to withdraw U.S. financial assistance to South Africa last month. This was due to concerns regarding the nation’s land policy and its genocide case at the International Court of Justice against Israel, an ally of the U.S.
The rand, like many risk-sensitive currencies, responds to international influences such as U.S. policies and economic indicators, alongside domestic factors. According to the central bank, South Africa’s net foreign reserves increased to $61.733 billion in February from $61.328 billion in January.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed up approximately 0.3%. Meanwhile, the yield on South Africa’s benchmark 2030 government bond remained steady at 9.07%.
In summary, the South African rand has weakened due to President Trump’s announcement to cut federal funding to the country, influenced further by disappointing U.S. job data. Despite losing ground temporarily, the rand has shown resilience over the past week. The broader economic implications of U.S. policies and local economic indicators will continue to impact the rand’s performance while South Africa’s net foreign reserves show a slight improvement.
Original Source: www.tradingview.com
