Nicola Mawson
The rand strengthened by 0.9% to R18.59 against the US dollar ahead of US President Donald Trump’s inauguration as the 47th President of the United States on Monday while Bitcoin surged to unprecedented levels despite the jitters in markets with volatility expected.
The local currency dropped below R18.70/$1 after reaching R19.23/$1 last week, but the US dollar softened as the markets were focusing on Trump’s plans to raise tariffs, tighten immigration, lower taxes, and ramp up deregulation, which are expected to have inflationary effects.
Investec chief economist, Annabel Bishop, noted that the rand had been highly volatile ahead of Trump’s inauguration but added that it had gained as the US was seen to be attempting to smooth relations with China.
“An unwind of the Trump trade, which previously saw US dollar strength and so rand weakness against the US dollar, is now allowing some rand strength against the US dollar,” Bishop said.
“Volatility is still likely for the rand… and the next few days will give some clarity on the Trump’s administration policies, and so the rand could see some further volatility.”
Wichard Cilliers, head of market risk at TreasuryONE, said the “jitters” in the local currency ahead of Trump’s inauguration were indicating that investors were taking a “wait-and-see” approach.
“The pre-event position squaring suggested that appetite remained cautious yet optimistic, tinged with speculation that Trump would disrupt markets sometime by using divisive comments or making short-notice U-turns on policy,” Cilliers.
Cilliers noted that most of the risk of unsettling Trump policies, such as on protectionism of the US market, has been priced into the currency.
“That said, considering the recent rebound of the ZAR below the 18.70 mark, it does make the market quite vulnerable to surprise events both during and after Trump's speech,” he said.
Cilliers said if Trump’s rhetoric continues to suggest previous policy signals such as a tariff that would affect South Africa and an isolationist trade measure, the rand would likely weaken on the re-evaluation of emerging market exposure.
“On the other hand, any conciliatory or predictable tone from Trump could support further recovery or stabilisation,” he said.
Bitcoin, which is in favour with Trump, ramped up from $102 000 (R1.9 million) early in the morning to past $108 000.
The incoming US administration is anticipated to adopt a more crypto-friendly stance, and currency watchers expect Trump to sign an executive order establishing a cryptocurrency advisory council and revising regulations to support the sector.
Nigel Green, CEO and founder of deVere Group, one of the world’s largest financial advisory and asset management organizations, predicted that the flagship cryptocurrency will continue its meteoric rise, potentially reaching $150 000 by mid-2025.
Green, renowned for his accurate Bitcoin forecasts, believes Trump’s return to the White House could mark the beginning of a Golden Age for cryptocurrencies.
“President Trump’s return to the White House could signal the Golden Age for crypto as it’s anticipated to usher in policies favorable to the sector,” he asserts.
“Trump’s administration has signaled intentions to provide clearer regulatory frameworks, potentially setting up a national Bitcoin reserve, and installing a crypto council of top-level advisors. All of these steps are likely to encourage further institutional investment in digital assets.”
Christo de Wit, Luno’s country manager for South Africa, said that “the crypto market has surged to unprecedented levels, with Bitcoin surpassing its all-time high a couple of times since November” when Trump was elected.
Of interest, said De Wit, was that Trump launched his $TRUMP cryptocurrency a few days before taking office and has reportedly bought Ethereum worth about $48 million.
“Market watchers are wondering whether this administration could mark the start of a new chapter for the cryptocurrency sector,” he said.
Johann Els, Old Mutual Group chief economist, said much of the uncertainty around Trump’s policies have been factored into the markets, particularly after his win in November when the dollar started “strengthening quite significantly”.
Yet, he said, “markets are certainly jittery, markets are uncertain. Markets will likely continue to be volatile, but I think the currency market has largely priced in this uncertainty.”
Markets may have overreacted, said Els, as it was more likely that tariffs will be implemented in a phased and measured approach. If this happens, there will be a market correction, he added.
Anchor Capital co-chief investment officer, Nolan Wapenaar, said the market should rather be looking at what Trump does in the first few weeks of his presidency.
“Markets have been volatile while we guessed what might happen based on campaign promises, staffing picks and subsequent remarks by the president elect. This is about to get real,” he said.
Wapenaar added that the next two weeks will be “all about tariffs”. The market is not expecting promised 20% tariffs for everyone and 60% tariffs for China, he said, and such a more moderate approach would be welcomed.
Yet, as Wapenaar said: “Trump would not be Trump if we didn’t get something controversial.”
BUSINESS REPORT