The rand weakened further on Thursday afternoon, marking a fairly sharp reversal from highs it touched at the start of the week. The drop in the value of the currency came 24 hours after the Reserve Bank’s monetary policy committee cut interest rates by 25 basis points to 6.50%, citing relatively benign inflation and improved growth prospects. A cut in interest rates tends to detract from the so-called carry trade — where money is borrowed in low interest-rate environments and invested in currencies that offer higher returns. The rate drop comes at a time when developed economies are looking to normalise their monetary polices through raising rates — a scenario that leaves the rand vulnerable to capital outflows. When announcing the Bank’s decision, governor Lesetja Kganyago referred to the rand as "somewhat overvalued", implying that its recent rally was overdone. The rand is headed for a positive close to the first quarter of 2018, having strengthened a hefty 8% to the dollar in t...
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