The rand limped along in midmorning trade on Thursday‚ battling to recover from a setback attributed to the ANC’s surprise decision to seek to change the Constitution to expropriate land without compensation.
Earlier in the week‚ the rand rallied to its best level to the dollar in about two months to R13.07/$ before sliding to lows of R13.39/$ by Wednesday morning‚ as markets digested the implications of the resolution by the governing party.
Two weeks ago‚ the South African Reserve Bank held interest rates steady‚ citing rising inflation‚ which resulted from high fuel prices‚ which in turn was partly a function of a weaker rand.
Several other factors were in the mix on Thursday‚ including a relatively stronger dollar‚ which stood tall against a basket of currencies after the US Federal Reserve painted a good picture of the US economy‚ implying that it would continue on its interest rate-hiking cycle.
Rand Merchant Bank analyst Nema Ramkhelawan-Bhana said the key message was that “the Fed remains focused on the strength of the economy and the acceleration in underlying inflation‚ which suggests that it should maintain a steady hiking path over the next few months”.
The rand was also caught up in renewed fears over trade war: US president Donald Trump is turning up the heat on China by proposing to increase tariffs from the initial 10% to 25% on $200bn worth of Chinese goods.
Apart from global trade concerns‚ markets will also focus on the Bank of England (BoE)‚ which is widely expected to raise rates by 25 basis points in the afternoon‚ despite the Brexit concerns.
In the lead-up to the BoE decision‚ the pound was shaky against the stronger dollar.
At 11:07am‚ the rand was 1.08% lower to R13.3723 to the dollar‚ from R13.2298 at the US close. It was at R15.5383 to the euro from R15.4305‚ and at R17.4870 to the pound from R17.3587.
By: Andries Mahlangu – BusinessLIVE
Source: TMG Digital.