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Cape Town - The negative correlation between the rand and dollar exchange rate and share prices on the JSE once again proved to be right last week.
The demand for emerging market currencies and bonds led to the rand strengthening against the dollar by 30c, or 2.2 percent, last week. The lower-than-expected inflation rate of 6.1 percent in March against 6.3 percent recorded in February, also helped the rand to appreciate against most currencies.
The currency in dollar terms (R13.15 to the dollar) is now almost 3 percent stronger than the day after the downgrade to junk status by S&P Global Ratings (R13.57), and 5 percent stronger than the R13.86 the day after Fitch downgraded both the domestic and foreign debt of South Africa to junk.
Against the pound, the rand gained 6c, or 0.4 percent, to R16.77 at the close of the JSE on Friday. The currency was also stronger by 21c, or 1.5 percent, against the euro at R14.07.
The oil price also came down sharply since last Wednesday and traded more than $3 (R39) lower over the week at $52.05 a barrel.
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Given the stronger rand, commodity prices tumbled last week, pushing the resources 20 index down by 4.8 percent.
The all share index on the JSE lost 2.55 percent as rand hedging stocks were sold off. The Industrial board retreated 1.9 percent, while the financial index traded 1.4 percent lower. The share market on Friday traded flat for the month to date (0.3 percent) and the all share index is now only 3 percent higher since the beginning of the year.
The side way movement in share prices is now going on for more than a year. The all share index is still 2.4 percent lower than a year ago. Property also moved weaker last week as the listed property index lost 2.2 percent. Bonds recovered somewhat. The R186 government bonds gained 18 points or 2 percent.
All eyes will be on the release of France’s economic growth data of the first quarter, the UK and the US. Interest rate decisions for Japan and the EU also will be announced.
The level of oil reserves for the US that will be announced on Wednesday will also be of importance.
On the local front, the release of the FNB/BER consumer confidence index for the first quarter will be of note.