Rand holds steady ahead of Reserve Bank meeting
The rand was little moved on Monday morning, but retained its hefty gains from last week in price action that underscored the local currency’s volatility.
The rand was back below the R13/$ mark, after weakening to R13.63/$ early last week.
The outcome of the Reserve Bank’s monetary policy committee meeting later in the week may provide some direction in a short term, although the dollar’s movement will also be monitored.
The market expects the committee to keep the repurchase rate on hold at 7% on Thursday, but governor Lesetja Kganyago’s commentary will be closely scrutinised for clues on the future interest rates path.
The committee’s meeting comes against the backdrop of increased volatility in the value of the rand, which plays a key role in shaping the inflation outlook.
Statistics SA will release inflation figures on Wednesday, with analysts expecting headline inflation to have moderated to an annual rate of 5.2% in June, from 5.4% in May.
The Bank is under pressure to lower rates to help shore up the local economy, which slipped into a technical recession in the first quarter.
"While we expect the [Bank] to keep the repo rate on hold at 7.00% … the downside surprises in CPI [consumer price index] and the technical economic recession should see a more dovish policy stance emanate," Investec economist Kamilla Kaplan said.
Last week, the dollar came under pressure following disappointing US inflation and retail sales data, which raised doubts on whether US Federal Reserve would raise interest rates once again in 2017.
At 9.03am‚ the rand was at R12.9916 to the dollar from Friday’s R13.0291‚ at R14.8836 to the euro from R14.9608 and at R17.0119 to the pound from R17.0867.
The euro was at $1.1456 from $1.1473.