Rand eases off strongest levels as US Fed takes centre stage
While there is scope for the rand to recover from its oversold levels, the outlook is still murky given the fickle global environment
The rand slipped from a multiweek high on Thursday morning, but still held below R14 to the dollar.
After the US midterm elections, which delivered a blow to the dollar, markets will now focus on the Federal Reserve to get a sense of how it plans to approach interest rates in the context of the recent volatility in the financial markets.
The Fed has already raised rates three times in 2018 and one more is expected in December.
The Fed’s statement, due out on Thursday night, carries implications for the dollar and, by default, other currencies such as the rand.
TreasuryOne currency dealer Andre Botha said in a note that more gains could still be in store for the rand if it manages to cling below R14 to the dollar.
The rand has been hypersensitive to global developments, though local factors have also played a part in its recent bout of volatility. The stronger rand environment will help ease worries about the inflation outlook, thus taking pressure off the Reserve Bank, which has previously cited the rand as a key risk to inflation.
But ETM Analytics market analyst Halen Botha said that while there was scope for the rand to recover from the oversold levels, the outlook was still murky given the fickle global environment, stemming from China-US trade dispute and the extent to which dispute affect global growth and sentiment.
At 10.05am, the rand was 0.26% weaker against the dollar at R13.9356, 0.39% weaker against the euro at R15.9421 and 0.34% weaker against the pound at R18.3123. The euro was 0.13% better at $1.1440.
The local bonds were weaker in early trade, with yield on the benchmark R186 bond rising to 9.12% from 9.06% at the last settlement.
Brent crude was at relatively steady at $72.31 per barrel, after touching their lowest level since August 20 early on Wednesday.