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The rand has swung wildly this week as the US electoral race between Donald Trump and Joe Biden shrinks.
With the latest results pointing to a more likely victory for Biden, the election race has led to market volatility and dollar weakness, boosting the local currency, which is now trading below rand 16.00 per dollar.
“The dollar fell once more as votes now begin to indicate a victory for the Democratic Party, with Joe Biden leading the race long before President Trump,” said Peregrine Treasury Solutions CEO Bianca Botes.
A Biden victory for the U.S. would keep the dollar on a weaker footing, Botes said, and a Biden presidency is expected to commit more funding to a Covid-19 stimulus package, while softening aggressive trade tactics. , particularly with China, which has been a problem. main striking point of Trump’s presidency.
Botes said a victory for Democrats will also bring stability to markets, in stark contrast to the volatility brought on by Trump’s erratic nature. This would provide support for riskier assets, he said.
“A sustained break below R16.00 will open the door to the next big technical level of R15.75. However, in the short term we can expect greater volatility until the election result is confirmed and there will certainly be greater instability if Trump challenges the election, ”Botes said.
The Stellenbosch University Bureau of Economic Research (BER) said that with a Biden victory, South Africa would benefit.
Two important implications would be the moderation of the dollar, as a result of the aforementioned stimulus package, as well as the boost for China, which is an important trading partner for South Africa.
Regarding the stimulus promoted by Biden, the BER said that “all other things being equal, this would support the US and global economic recovery in 2021, with positive effects in South Africa.”
Referring to easing trade tensions with China, the BER said Biden is unlikely to use tariffs as a means to force concessions from China.
“This should be beneficial to the Chinese economy, with some potentially positive effects on the country’s demand for raw materials, many of which are supplied by South Africa.”
Given the stakes, global financial markets may be nervous and volatile until there is greater clarity on the ultimate winner of the US election, but also the accompanying political agenda, the BER said.
Read: Trump vs Biden: What This Week’s US Elections Will Mean For South Africa
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