Rand at best level in months as all eyes are on US election results

It is widely believed that the outcome of the US presidential election could have a major impact on world economic growth.

According to a report from UBS that was released this week, a Democratic Party sweep with Joe Biden as the new US president is the optimum scenario for global growth.

UBS is a global firm providing financial services to private, corporate and institutional clients.

And as if to confirm this notion, the rand started trading below the key R16 to the dollar level, buoyed by the prospects of a Joe Biden win in the closely contested US presidential race.

The rand hit R15.83 to the dollar at around 20:35 on Wednesday night, its best level since the first week of March. It eased a bit to around R15.87 later – but was still trading over 1% stronger against the dollar on the day.

Before Wednesday the rand was going up and down as news of the election started trickling in. But even after the breakthrough on Tuesday, it was a seesaw day for the currency. The rand weakened some 2% in morning trade on Wednesday to R16.40 to the dollar at 09:50. However, it ended the day stronger and is likely to strengthen further this week if Biden wins.

Economists believe that a sustained break below R16.00 will open the door for the next big technical level of R15.75 against the dollar.

On Friday morning, when some crucial voter counts were still outstanding, the rand already broke through this level and traded at R15.74 to the dollar.

A Biden win is expected to see the dollar weaken as he has promised a larger Covid-19 US economic stimulus package. The Democrat leader is also anticipated to end Trump’s trade war with China.

However, it is expected that volatility will continue until the election result is confirmed and certainly there will be greater instability to come if the election is contested by Trump.

Izak du Plessis asked Ricus Reeders of PSG Wealth why the rand is so sensitive about what happens in America. Watch the video.