JOHANNESBURG – Exchange rates of emerging countries took a hiding last week due to the ongoing geopolitical storm between the US and North Korea, and the hawkish stance of the US Federal Reserve on expected hikes in interest rates.
The rand had one of its worst weeks over the last three months. Against the dollar, the local currency depreciated by 30c, or 2.1percent, last week. It traded above R13.51 at the close of the JSE on Friday.
Against the pound, the rand at one stage last week tested the R18.20 level and at the close of JSE on Friday it traded at R18.09. The Brent oil price also surged last week and traded at one stage above $58 (about R786) a barrel. This was more than $6 a barrel higher than a month ago.
Although the price for petrol is expected to increase by 30c a litre and that of diesel by 42c a litre this week, the current much weaker rand and higher oil prices are expected to push fuel prices much higher during the beginning of November. On global stock markets, share prices continued to move stronger. On Wall Street, the Dow Jones industrial index for the first time broke through the 22370 levels and the Standard & Poor’s set a new record level of above 2516 points on Friday.
Locally, the increase in the Production Price Inflation from 3.6percent in July to 4.2percent in August supported the decision of the monetary policy committee of the Reserve Bank not to lower the repo rate. In Its latest Quarterly Employment Statistics report, Stats SA announced that 34000 jobs were lost in the formal non-agricultural sector during the second quarter. This followed the consecutive job losses of 41000 during the first quarter. As a result, gross earnings by workers had fallen by R2.3billion during the second quarter.
Given the uncertainties on the political front, both locally and globally, shares on the JSE moved nervously and sideways last week. The all share index traded for the second week in a row in a narrow band and lost only 259 points, or 0.5percent, over the week to close at 55579.92 points.
The financial index, due to the weaker rand, traded lower by 1.7percent, while both the industrial index (-0.2percent) and the resources index (0.2percent), were little changed.