Rand pares earlier gains following dovish European Central Bank minutes
The rand came off its best levels to the dollar on Thursday afternoon, tracking a weaker euro, which lost ground after the release of European Central Bank minutes.
The July meeting minutes indicated, among other things, that convincing progress on inflation, and favourable financing conditions were needed before further monetary policy tightening was effected.
Policy makers also expressed concern over the continued strength of the euro. The dollar has been under pressure following US Federal Reserve minutes released on Wednesday, as well as political concerns centred on the administration of US President Donald Trump.
Minutes from the Fed’s last policy meeting on Wednesday indicated that officials were divided over the timing of future interest-rate increases‚ as they struggled to understand why inflation had been so weak in recent months‚ reported Dow Jones Newswires.
The minutes highlighted the growing divide that was appearing within the Federal Reserve with respect to interest rates, said Oanda analyst Craig Erlam. There appeared to be a united front when it came to reducing the balance sheet — which now looked increasingly likely to start in September — but traders appeared unconcerned by this.
Trump’s decision to disband two key business advisory councils on Wednesday, after business executives protested against his failure to condemn racism, also put some pressure on the dollar.
Rand Merchant Bank analyst Isaah Mhlanga said the councils were crucial links between the executive and corporate US. Trump’s decision decreased the prospect of his administration following through with its promised pro-business policy agenda, and could unwind some of the optimism-inspired growth in the world’s largest economy.
At 3.30pm‚ the rand was at R13.1712 to the dollar from R13.1781, at R15.4358 to the euro from R15.5071, and at R16.9622 to the pound from R16.9884.
The euro was at $1.1718 from $1.1767.