The South African rand. Picture: REUTERS
The South African rand. Picture: REUTERS

The rand was wobbly on Friday morning, partly due to geopolitical concern after North Korea defied the international community by firing another missile over Japan.

The latest missile came just days, after the UN Security Council imposed sanctions on Pyongyang for conducting a nuclear bomb test earlier this month.

But the market reaction this time seemed more measured, with the rand changing hands at R13.16, which was well within the trading range of the week.

But the interesting price action was centred on the rand versus the British pound following the Bank of England’s (BoE’s) policy meeting on Thursday.

The BoE left interest rates unchanged, but its accompanying minutes gave strong indications that the central bank could raise interest rates in the coming months.

The signal boosted the pound sterling and knocked the rand to its lowest level since May.

The US headline inflation topped market expectations, coming in at 1.9% in August on a year-on-year basis, reviving the expectation of a rate increase by year-end.

Higher rates in the developed markets have the potential to slow the pace of bond flows to SA, which sits at R60bn so far in 2017.

The bond inflows have helped cushion the rand against local political shocks, which included the midnight cabinet reshuffle in March.

Still, analysts believe that the rand is likely to be volatile as the ruling ANC heads into its elective conference in December to choose a successor to President Jacob Zuma, whose term as party leader would come to an end.

At 9.24am, the rand was at R13.1504 to the dollar from R13.1166, at R15.6679 to the euro from R15.6372 and at R17.6559 to the pound from R17.5787.

The euro was at $1.1915, from $1.1918.

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