THE rand had jumped about 2% against the dollar and pound on Thursday afternoon‚ extending earlier gains after firming on both the Bank of England interest-rate decision and US inflation data.
The day’s main risk event‚ US inflation for April‚ led to marginal further dollar weakness‚ with emerging-market currencies earlier supported by an easing oil price.
US core inflation (excluding prices of food and fuel‚ which are volatile) rose 2.1% on an annualised basis‚ less than expected. Overall prices grew 2.5%‚ in line with consensus expectations.
The rand extended its gains slightly on the print‚ while the yield on the benchmark US paper continued to slide further below the psychologically important 3% level.
Brent crude earlier approached $78 a barrel before pulling back. Supply concerns have rattled the market after the US pulled out of the international Iran nuclear deal‚ pledging additional sanctions against the world’s sixth-largest producer in 2017.
However, US officials have said that oil-producing US allies such as Saudi Arabia had agreed to boost output and keep prices in check ahead of the withdrawal‚ Dow Jones Newswires reported.
Earlier‚ the Bank of England (BoE) kept interest rates on hold‚ adding that despite recent weak economic data‚ growth was expected to accelerate. This led to some weakness in sterling against the euro‚ although the pound held its ground against the greenback.
Analysts cited the BoE’s revised forecast for economic growth as one of the reasons for pound weakness‚ as it called into question further interest-rate increases.
“Still‚ markets continue to price in a rate hike this year — most likely in November — which assuming Brexit negotiations progress as planned‚ will be far more convenient for the central bank‚” said Oanda analyst Craig Erlam.
At 3pm‚ the rand was at R12.3261 to the dollar from R12.5610‚ R14.7071 to the euro from R14.8872 and R16.6782 to the pound from R17.0125.
The euro was at $1.1932‚ from $1.1852.
Source: TMG Digital.