Picture: 123RF/LEON SWART
Picture: 123RF/LEON SWART

The rand was marginally firmer against the dollar on Thursday morning, holding on to gains this week, as markets partially price in an interest rate increase.

Analysts are almost evenly split on whether the Reserve Bank will raise rates, amid easing rand volatility and global oil prices, but also significant geopolitical risks.

The rand gained on Wednesday, although this was similar to most emerging-market currencies, and analysts said a weaker dollar and inflation data that was slightly lower than expected played a role. Market expectations of an increase also picked up a little after the inflation data was released.

Trade is likely to be subdued due to the US Thanksgiving Day holiday.

Investec chief economist Annabel Bishop, who expects the Bank to raise rates, said an increase is unlikely to lead to much rand strength, and the outlook for the currency is clouded by US monetary policy tightening.

If the US raised interest rates as much as it planned to in 2019, additional rand weakness could be in the offing, and the ability of the Bank to keep pace with US interest rate increases was limited, said Bishop. 

Fair value for the rand, however, remained at R9.50 to the dollar, she said, and various internal inflationary pressures had lessened since the Bank’s September meeting.

At 9.30am the rand was 0.17% firmer against the dollar at R13.9089, 0.03% against the euro at R15.8601, and 0.08% against the pound at R17.7901. The euro was 0.16% firmer at $1.1403.

The bid on the benchmark R186 government 10-year bond was last seen at 9.055% from 9.04%.