Rand firms on weaker dollar despite solid US data
The rand was firmer on Monday afternoon as the euro clawed back some lost ground against the dollar, ahead of the local interest-rate decision by the Reserve Bank later in the week. No change is expected.
The Bank is likely to take into consideration the recent strength in the rand, which has gained 4% since the beginning of July, said Investec chief economist Annabel Bishop. "The rand still remains vulnerable to international events, and so will continue to be volatile."
The rand was supported by an improved inflation outlook, with the local consumer price index (CPI) now likely to average about 5% in 2018 and about 5.5% in 2019.
The Reserve Bank’s tone turned hawkish when the rand began to weaken after its rise as a result of "Ramaphoria". It lost nearly 2% to the dollar in May and more than 8% in June.
The dollar was on the back foot following strong retail sales data in the US for June, rising 0.5% month on month, in line with expectations. The prior month was revised up to 1.3%, from 0.8%.
However, the market reacted cautiously amid concern about the effect of an escalating global trade war on the US economy, analysts said.
At 3.11pm, the rand was at R13.2172 to the dollar from R13.2645. It was at R15.4911 to the euro from R15.5082, and R17.5155 to the pound from R17.5470. The euro was at $1.1705 from $1.1692.
Local bonds tracked the gains in the rand, with the benchmark R186 government bond last bid at 8.695% from 8.73%.
The US 10-year treasury was at 2.8441% from 2.8285%.