Rand slightly stronger ahead rates decision in the US
The rand’s strength is due largely to a weak dollar
18 December 2018 - 15:44
byAndries Maghlangu
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
The rand held steady at relatively stronger levels on Monday afternoon despite the uncertain global environment, which typically drains appetite for assets deemed risky.
The relative strength in the value of the local currency came courtesy of a weak dollar, which is in the spotlight on the eve of the interest rates decision by the US Federal Reserve.
The Fed is widely expected to raise rates by 25 basis points when its federal open market committee concludes a two-day meeting on Wednesday, but the market focus will be on its outlook for 2019.
“The [dollar] retreat is particularly interesting given the widespread expectation that the Fed is set to lift rates,” said Nico du Plessis, analyst at Mercato Financial Services “Not only does this give us some insight into just how much has been priced in, but it also highlights the possibility that the Fed might reach the pause button, given the growing number of headwinds becoming more prominent with each passing month.”
The headwinds include the higher stock market volatility and the still unresolved US-China trade dispute and its potential effect on the broader US economy.
The uncertain global environment has recently led to wild swings in the rand, which is highly sensitive to shifts in global sentiment.
Investors have, in the recent past, showed signs of angst over the health of the global economy, leading to a big sell-off in risky assets, most notably equities.
Foreigners dumped nearly R11bn worth of local bonds over the past week, according to the JSE’s weekly data. Foreigners hold the biggest share of local bonds at about 40%, rendering the country vulnerable to capital outflows when global sentiment takes a knock.
At 2.51pm, the rand was 0.65% stronger against the dollar at R14.3075, 0.33% better against the euro at R16.2842, and 0.11% better against the pound at R18.1443. The euro was 0.37% better against the dollar at $1.1382.
Local bonds had improved, with the yield on the benchmark R186 dropping to 9.11%, from 9.19% at its last settlement.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Rand slightly stronger ahead rates decision in the US
The rand’s strength is due largely to a weak dollar
The rand held steady at relatively stronger levels on Monday afternoon despite the uncertain global environment, which typically drains appetite for assets deemed risky.
The relative strength in the value of the local currency came courtesy of a weak dollar, which is in the spotlight on the eve of the interest rates decision by the US Federal Reserve.
The Fed is widely expected to raise rates by 25 basis points when its federal open market committee concludes a two-day meeting on Wednesday, but the market focus will be on its outlook for 2019.
“The [dollar] retreat is particularly interesting given the widespread expectation that the Fed is set to lift rates,” said Nico du Plessis, analyst at Mercato Financial Services “Not only does this give us some insight into just how much has been priced in, but it also highlights the possibility that the Fed might reach the pause button, given the growing number of headwinds becoming more prominent with each passing month.”
The headwinds include the higher stock market volatility and the still unresolved US-China trade dispute and its potential effect on the broader US economy.
The uncertain global environment has recently led to wild swings in the rand, which is highly sensitive to shifts in global sentiment.
Investors have, in the recent past, showed signs of angst over the health of the global economy, leading to a big sell-off in risky assets, most notably equities.
Foreigners dumped nearly R11bn worth of local bonds over the past week, according to the JSE’s weekly data. Foreigners hold the biggest share of local bonds at about 40%, rendering the country vulnerable to capital outflows when global sentiment takes a knock.
At 2.51pm, the rand was 0.65% stronger against the dollar at R14.3075, 0.33% better against the euro at R16.2842, and 0.11% better against the pound at R18.1443. The euro was 0.37% better against the dollar at $1.1382.
Local bonds had improved, with the yield on the benchmark R186 dropping to 9.11%, from 9.19% at its last settlement.
mahlangua@businesslive.co.za
Rout could continue after a year to forget: Africa markets in 2019
Booming supply leads oil prices down for third straight session
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
Rand holds up for now despite global risk-off tone
JSE slips almost 2% as global growth fears intensify
Price of gold rises as dollar remains twitchy ahead of Fed meeting
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.