South African rand weaker as dollar gains on Trump tariff comments

British Pound

Reuters: The British pound was little changed against the dollar on Thursday, trading just below a more than two-month high hit the previous day, as U.S. President Donald Trump's tariff threats turn towards the European Union. Sterling was last at $1.2674 against the dollar, little changed on the day, having risen to $1.2717 on Wednesday, its highest level since December 18. Late on Wednesday, Trump floated the idea of a 25% tariff rate on goods from the European Union, saying he would be announcing it "very soon". Danske Bank analyst Mohamad Al-Saraf said the pound could be a relative outperformer from U.S. import tariffs because the trade deficit between the U.S. and Britain is relatively small.

"If we actually see tariffs being implemented, we expect the pound to outperform in the G10 space," Al-Saraf said. "Looking at the price action in the past few months, the pound is relatively immune to all this tariff talk." The pound has also been supported by expectations for relatively fewer rate cuts from the Bank of England than some other central banks, namely the European Central Bank. The BoE lowered interest rates this month and markets are pricing in two further quarter-point cuts this year. For the ECB, which is expected to lower interest rates next week, markets are fully pricing in three rate cuts and around 30% chance of a fourth.

Against the euro, the pound was little changed at 82.7 pence , just above last week's near 1-1/2 month high of 82.635 pence. Eyes were also on British Prime Minister Keir Starmer's trip to Washington where he is set to meet Trump later on Thursday at the White House, with talks on security and a possible ceasefire in Ukraine high on the agenda. Earlier this week, Starmer said Britain's defence spending would reach 2.5% of GDP by 2027, a signal to Trump that the UK is serious about ramping up military expenditure.

US Dollar

Reuters: Investors unnerved by the prospect of U.S. President Donald Trump's impending tariffs drove a wave of selling on Friday in risk-sensitive currencies such as the Aussie, sent bitcoin tumbling and gave safe-haven support to the dollar. On Thursday Trump said his proposed tariffs of 25% on Mexican and Canadian goods would take effect on March 4 along with an extra 10% duty on Chinese imports, defying expectations of those who hoped for a further delay in the levies. The risk-off moves gathered steam during the trading session, with cryptocurrencies among the biggest losers for the day as bitcoin slid more than 5% to bottom at $79,650.40, its weakest level since November 11.

Ether similarly tumbled more than 5% to an over 13-month low of $2,127.41. The two tokens were on track for their steepest monthly falls since June 2022, following a towering rally late last year on optimism that the Trump administration would be a boon for the asset class. "Bitcoin's fall below $80,000 shows that positive sentiments from a crypto-friendly administration and high-profile endorsements have run their course," said Joshua Chu, co-chair of the Hong Kong Web3 Association. "It's clear bitcoin is a risk asset, not the inflation hedge or digital gold it's often touted to be."

In the broader market, the Aussie slid 0.4% to its lowest in more than three weeks at $0.62105, extending a decline of 1% from the previous session. That put it on track for a weekly loss of more than 2%. The New Zealand dollar similarly fell 0.5% to $0.5604 and was set to shed 1.9% for the week. The euro struggled at a two-week low of $1.0380 and was also headed for a weekly fall of 0.6%, which would put its monthly gain at 0.35%. "Markets were shaken out of tariff complacency," said Sim Moh Siong, currency strategist at Bank of Singapore.

"We continue to see scope for some U.S. dollar strength if tariff risks materialise by April even as our conviction that the U.S. dollar can strengthen meaningfully is now reduced given cracks in the U.S. exceptionalism story." The Canadian dollar slipped to a more than three-week low of C$1.4452, as it heads for a weekly decline of 1.5%. The greenback's moves against the Chinese yuan were more muted as it was little changed at 7.2846, after rising to a two-week top of 7.2914 earlier in the session.

The activity left the greenback hovering near a one-week top against a basket of currencies. The dollar index last stood at 107.34, having jumped 0.8% on Thursday. Still, the index was on track for a monthly loss of more than 1%, its worst since August, as the dollar faces downward pressure amid worries over the health of the world's largest economy. A raft of weaker-than-expected economic data has led traders to ramp up bets for more Federal Reserve rate cuts this year, in turn sending U.S. Treasury yields lower and proving a drag on the dollar.

"For now, it's the growth story that is dominating, pushing yields lower, while at the same time, we're starting to see a little bit of an increase in volatility in markets in general and that risk aversion as well," said Rodrigo Catril, senior currency strategist at National Australia Bank. Elsewhere, sterling fell 0.12% to $1.2587, but was set to end the month with a gain of more than 1.6% for its best performance in five months. The pound has partly been supported by expectations for relatively fewer rate cuts from the Bank of England than some other central banks, namely the European Central Bank.

The yen was one of the few currencies to gain against a stronger dollar on Friday, rising 0.1% to 149.60. The Japanese currency was set to jump more than 3.7% for the month, its best since last July, on heightened bets of more rate hikes this year by the Bank of Japan. Core consumer prices in Tokyo slowed in February, but kept well above the BOJ's 2% target, data showed on Friday.

South African Rand

Reuters: South Africa's rand weakened on Thursday after U.S. President Donald Trump said his proposed tariffs on Mexican and Canadian goods will go into effect next week. At 1429 GMT, the rand traded at 18.4775 against the U.S. dollar, about 0.2% weaker than its previous close. The dollar last traded about 0.6% stronger against a basket of currencies. Wichard Cilliers, head of market risk and TreasuryONE, said Trump's comments rallied the greenback. Trump said his proposed 25% tariffs on Mexican and Canadian goods will go into effect on March 4 as scheduled because drugs are still pouring into the U.S. from these neighbours.

Trump also said he would impose an additional 10% duty on Chinese goods on that day, on top of the 10% tariff that he levied on February 4 on imports from China. Markets will also look for direction from a personal consumption expenditures reading, the Federal Reserve's preferred measure of inflation, on Friday for clues on the U.S. central bank's future interest rate path. Like other risk-sensitive currencies, the rand often takes direction from global drivers in addition to domestic factors.

South Africa's producer inflation was at 1.1% year on year in January from 0.7% in December, statistics agency data showed on Thursday. On the Johannesburg Stock Exchange, the blue-chip Top-40 index last traded about 1.2% lower. South Africa's benchmark 2030 government bond was weaker, with the yield up 5.5 basis points to 9.08%.

Global Markets

Reuters: Equities slumped across Asia on Friday and the U.S. dollar hovered near multi-week highs against the currencies of the country's top trading partners as concerns about an escalating global trade war soured market sentiment. Technology shares took an additional hit following a sell-off in AI darling Nvidia and other so-called "Magnificent Seven" Wall Street mega-cap stocks, as investors judged the chipmaker's earnings report harshly a day after it was released. The safe-haven yen and Swiss franc strengthened, with Japan's currency getting an additional boost from lower U.S. Treasury yields. Bitcoin dipped below $80,000 for the first time in more than three months.

An overall firmer dollar weighed on commodities including gold, although oil held on to most of Thursday's strong gains spurred by U.S. President Donald Trump's cancellation of Chevron's Venezuela licence. Trump said on Thursday that 25% duties on imports from Canada and Mexico will come into effect on March 4 - not April 2 as he had suggested the day prior - and said goods from China will be subject to an additional 10% duty. He also this week promised 25% tariffs on shipments from the European Union.

"A market that had reduced its sensitivity to recent tariff headlines has had to reconsider that reaction function," said Chris Weston, head of research at Pepperstone. "The skew for risk in the near-term suggests the downside has further to go here." Japan's Nikkei tumbled 3.3%, buckling under the weight of a stronger yen, while South Korea's Kospi sank 3.2%. Taiwanese shares dropped 1.5%, and Australia's stock benchmark sagged 1.3%. Hong Kong's Hang Seng slid 2.3%, although mainland blue chips declined by a relatively small 0.8%.

Many analysts project that Trump's trade policies raise the odds of additional stimulus from next week's meeting on China's National People's Congress. Pan-European STOXX 50 stock futures pointed 1.2% lower, after bourses around the region retreated on Thursday. U.S. S&P 500 futures were down 0.2% following a 1.6% tumble for the cash index overnight. World stocks are on track for their worst week since mid-December, slumping close to 2%. The U.S. dollar index - which gauges the greenback against six major peers including the euro, yen and franc - edged up to 107.39 for the first time since February 13.

The euro dipped to $1.0380, the lowest since February 13. The Swiss franc gained slightly to 0.8989 per dollar, bouncing off Thursday's low of 0.9005. The yen climbed 0.2% to 149.54 per dollar, with 10-year Treasury yields - which the currency pair tends to track - sinking as low as 4.2220% in Asian hours, a level last seen on December 11. While the threat of escalating tariffs has spurred dollar strength, it has also stoked worries about its impact on the U.S. economy.

Recent U.S. data has been soft, and traders have reacted by pricing in at least two quarter-point Federal Reserve interest rate cuts this year, with the first as early as June and another as soon as September. Investors will be keeping a close watch on the Fed's preferred inflation gauge - the PCE price index - set for release later in the day. Monthly non-farm payrolls figures are due a week from now. Bitcoin last changed hands 4.5% weaker at $80,517, after earlier touching $79,558 for the first time since November 11.

Gold sagged 0.6% to $2,856.49 per ounce, the lowest since February 10. Oil prices slipped but remained not far from Thursday's peaks. The more active May Brent crude futures slipped 0.4% to $73.26 a barrel, while U.S. West Texas Intermediate crude futures were at $70.04 a barrel, also down 0.4%. Front-month Brent that expires later on Friday traded at $73.69, down 0.5%.

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