Investors and the rand take in Joe Biden’s historic action to step down from US race

Published Jul 22, 2024

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The rand was weakened on Monday morning when compared to its close on Friday as the world reacts to President Joe Biden dropping out of the US elections.

The rand was trading at around R18.32 against the dollar at 8.30am. The ZAR closed at R18.18 to the dollar on Friday at 5pm.

Anchor Capital said that the rand weakened against the US dollar on Friday as the yield on benchmark government bonds advanced.

The financial institution said that the yield on the 2030 bond rose to 9.60%, while that for the longer-dated 2040 issue advanced to 11.59%.

Other global currencies

The rand was trading at R19.90 to the euro and R23.61 to the pound at 8.30am on Monday.

On Friday, the euro mostly declined against most of the major currencies. In Germany, producer price inflation slowed to its lowest pace in June, Anchor Capital noted.

In the eurozone, current account surplus remained unchanged in May. In the UK, retail sales dropped in June, amid election uncertainty and poor weather, the institution added.

Biden steps down and makes way for Kamala Harris

Biden announced on Sunday that he has withdrawn from the presidential race.

He has further endorsed Vice President Kamala Harris as the Democratic presidential nominee.

"It has been the greatest honour of my life to serve as your President. And while it has been my intention to seek re-election, I believe it is in the best interest of my party and the country for me to stand down and to focus solely on fulfilling my duties as President for the remainder of my term,“ Biden said on social media.

"For now, let me express my deepest gratitude to all those who have worked so hard to see me re-elected. I want to thank Vice President Kamala Harris for being an extraordinary partner in all this work.“

The president said in a second post that his first decision as the party nominee in 2020 was to pick Harris as his vice president. He acknowledged that it was the best decision he made.

“Today I want to offer my full support and endorsement for Kamala to be the nominee of our party this year. Democrats — it’s time to come together and beat Trump. Let’s do this,” he said.

Will the rand be impacted?

South African investors will be paying close attention to the ramifications of Biden stepping down and this plays a role in how they invest in riskier assets.

Last week, analysts said that the assassination attempt on Donald Trump impacted investors' appetite for riskier assets like the rand.

The ZAR is generally in line with Asian emerging market currencies and at times the rand can take its cue from other major global currencies.

Mark Haefele, Chief Investment Officer at UBS Global Wealth Management said on Monday that the focus will now shift to the confirmation of a new democratic nominee, whether there will be any material differences in their policy priorities that could affect markets, and whether the new nominee will be more likely to defeat Trump in November.

“In the near term, we should expect some market volatility as investors digest the news. We recommend various strategies to manage the risks surrounding the election, including holding a well-diversified portfolio and considering structured investments with capital preservation or yield generation features,” he advised.

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