The past week began on an encouraging note on global financial markets
following the weekend announcement of the appointment of Scott Bessent as
prospective Treasury Secretary of the US under the Trump administration next
year. Bessent was a popular choice with the markets because of his successful
career as a private equity asset manager. He was seen to favour fiscal rectitude
and attempts at limiting inflationary pressures.
Consequently, equity and bond markets rallied in the US. Conversely, the
possibility that the environment would be ripe for US interest rates to decline by
more than the market has recently been anticipating caused the Dollar to
weaken following its 5%-odd rally in the wake of the election of Trump as the
US’s next president. The Rand gained moderately as a consequence, rallying
from R18.20 to a peak of R17.99. The positive mood early in the week was
dashed somewhat on Tuesday by reports that Trump had threatened to
introduce a 25% tariff on all imports from Canada and Mexico, as well as an
additional 10% on imports from China, as soon as he is inaugurated.
The Rand weakened back to over R18.25 in midweek trade in sympathy with
other emerging market currencies, especially the Mexican Peso, in response to
such threats. Worst of all was the Russian Ruble, which collapsed by 7% due to
the impact of sanctions on that economy.