The good side of uncertainty about US stagflation: SA markets benefit

THE dichotomy between US unemployment and inflation, baptised as a process of stagflation, continues to shift investments to gold, platinum and other haven assets.

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Together with this sentiment of further rate cuts by the US Federal Reserve, the decision by the Reserve Bank’s Monetary Policy Committee not to lower the repo rate the previous week, pushed real rates between the US and South Africa to unique highs.

This causes portfolio capital inflow and the rand/dollar exchange rate to trade at its strongest level since September 26, 2024.

The currency last Tuesday in intraday trade reached $17.22 against the dollar. Although the rand ended Friday sideways at R17.34/$, the same level as the previous week, it is still 150 cents stronger than at the beginning of the year (R18/84/$).

Against the euro the rand improved by 10c last week to R20.28/€, trading still 100c weaker than at the beginning of the year (R19.20/€).

Against the UK pound, the rand also improved slowly, trading stronger at 20c at R23.25/£, the same level as at the beginning of the year.