Rand stretches winning streak as dollar sags

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The rand was on firmer footing on Friday morning‚ looking to cap the week on a high note.

The local currency has been steadily recovering to the dollar‚ which has hit a soft patch amid uncertainty over whether the US Federal Reserve would stick to its interest-rate hiking cycle in 2018.

The question marks surfaced earlier in the week when Fed officials expressed concern about the medium-term outlook for inflation‚ which has consistently run below the 2% target.

“The market has come to accept a December rate hike‚ just as it had to be led by the hand to recognise the March hike. It has been sceptical of hikes next year‚” Brown Brothers Harriman analysts said in a note.

As the dollar sagged‚ the rand recovered in line with other emerging-market currencies‚ suggesting the revival of the so-called carry appeal‚ where money is borrowed in low interest-rate environments and invested in currencies that offer higher returns.

“The market has come to accept a December rate hike‚ just as it had to be led by the hand to recognise the March hike. It has been sceptical of hikes next year‚” Brown Brothers Harriman analysts said in a note.

The stronger currency helps keep inflation in check‚ though it does not bode well for exporters.

US inflation figures for September are likely to give markets short-term guidance. Economists expect inflation to have to risen to an annual rate of 2.3% in September‚ from 1.9% in August.

At 10.53am‚ the rand was at R13.3795 to the dollar from R13.4498.

It was at R15.8356 to the euro from R15.9176 and at R17.8077 to the pound from R17.8365.

The euro was at $1.1834 from $1.1835.

By: Andries Mahlangu -BusinessLIVE

Source: TMG Digital.

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