The South African Rand was retreating from a strengthening dollar on Wednesday after the warm reception initially given to Finance Minister Tito Mboweni's emergency budget was overcome by a tide of risk aversion as trade tensions resurfaced and fears of a second coronavirus wave lingered.
The currency had pulled away from session lows to advance on a dollar that was already being bolstered by risk aversion Wednesday, as well as Pound Sterling after Finance Minister Tito Mboweni set out a comprehensive plan for navigating the financial carnage caused by the coronavirus.
Markets were looking for a "credible plan" to right the capsizing South African finances and initial price action in the wake of the emergency update to the national fiscal strategy suggests that investors were not disappointed, even if the dollar did quickly put a stop to the Rand's recovery.
"We also think today’s dollar bid is rather appropriate given yesterday’s nonsensical, “risk-on”, USD selling following the US administration’s determined effort to walk back Peter Navarro’s “it’s over” comment with regard to the US/China Phase One trade deal. Nothing fundamentally changed yesterday," says Eric Bregar, head of FX strategy at Exchange Bank of Canada. "Some more troubling COVID-19 statistics out of California are now crossing the wires and making matters a little bit worse for the S&P futures."