The dollar and the rand. Picture: REUTERS/SIPHIWE SIBEKO
The dollar and the rand. Picture: REUTERS/SIPHIWE SIBEKO

The rand was little changed on Monday morning, but its weakening trend against the dollar and pound was intact.

Rand Merchant Bank currency strategist John Cairns tracked the underlying weakness in the local currency to increased odds of an interest rate increase in the US in December.

The US Federal Reserve is expected to hold fire on rates on Wednesday when it concludes its scheduled policy meeting, but should give clues on future moves.

"A week ago the market put little more than a 30% probability of a December Fed hike. This morning, the probability is just shy of 60%," said Cairns.

He said better than expected US inflation figures had also fuelled the rate hike expectations.

The renewed volatility in the rand would likely be a concern for the Reserve Bank’s monetary policy committee (MPC), which os widely expected to cut the repurchase rate by at least 25 basis points on Thursday.

A weaker currency breeds inflation, which economists expect to have crept up to an annual rate of 4.8% in August, from 4.6% in July.

The rand’s volatility can also make planning difficult for companies.

At .9.17am the rand was at R13.3038 to the dollar from R13.3079, at R15.9543 to the euro from R15.9101 and at R18.0147 to the pound from R17.9644.

The euro was at $1.1991 from $1.1955.

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