Markets wrap: Commodities, rand bleed after yet another rampant day for the US dollar

The South African rand is now firmly on the back foot, trading at R14.25 to the US dollar after a rampant day for the greenback, which is still basking in the Federal Reserve’s hawkish tone on interest rates earlier this week.

“We have seen all the emerging market currencies taking a pounding as the US dollar and ‘risk-off’ [sentiment] are driving markets at the moment. The question now becomes where the US dollar wants to take a breather in order for the market to take stock of current events and levels,” says TreasuryONE.

The firmer dollar continued to wreak havoc in the commodity markets, with gold losing now nearly $100 since the FOMC meeting on Wednesday. The yellow metal was last trading at $1,778/oz.

Bloomberg reports vast amounts of stimulus, economies reopening from the pandemic and strong Chinese demand have driven a surge in raw material prices this year, some to record highs. Yet they’ve slumped in the past two weeks – with some wiping out gains for the year – on a more hawkish US monetary policy tone, China’s bid to cool inflation pressures and better weather for crops.

Platinum also slipped and is 1% down for the day, last trading at $1,050/oz.

Palladium managed to move into the green, last trading 1% firmer at $2,525/oz after losing 10% in the previous trading session. Brent Crude also firmed and was last trading at $73.57 a barrel. TreasuryONE says it will keenly watch the crude oil space for news of an oil supply shortage which could further bump up the price.

In the international currency and equity markets the US dollar has caused more currencies to bleed, with the greenback last trading at 1.1860 against the euro. “With the US dollar on the front foot, it is no surprise that the US equity market is also under pressure, with the Dow Jones and S&P 500 both losing 1% in early morning trade,” comments TreasuryONE.

The currency trading house expects emerging market currencies to come under more pressure, and “it will not be a surprise if the rand tests R14.50 in the next couple of weeks”.

“However, the sudden move weaker should allow some scope for consolidation, but with the US dollar in charge, it could be short-lived,” says TreasuryONE.

Indicators as of 17:00

USDZAR           14.2697
EURUSD           1.1854
EURZAR            16.9102
GBPUSD          1.3806
GBPZAR           19.6934
AUDZAR          10.6762
CADZAR           11.4591
CNYZAR            2.2108
ZARJPY            7.7247
CHFZAR            15.4571
USDAOA          645.53

Equities and bonds
R186              7.44%
US 10 Year       1.46%
JSE                 -1.30%
FTSE               -1.80%
S&P 500          -0.91%

Gold                $1 776.11
Plat               $1 051.25
Plad               $2 517.05
Rhod               $21 740.00
Irid                $6 090.00
Ruth              $748.00
Copp             $9 205.80
Brent             $73.57
Iron Ore 62.5% $214.69
Coal API4         $111.00
Gold ZAR         R25 354.50
Plat ZAR           R15 006.92

Indicators brought to you by TreasuryONE

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