Dovish Fed may cheer JSE
Remarks by Fed chair Jerome Powell and other US central bankers helped the rand strengthen 4c overnight
Buoyant Asian markets pointed to a fourth trading day of gains for the JSE on Friday morning.
Miners, however, may suffer from a strengthening rand.
The rand may have been boosted by US Federal Reserve chair Jerome Powell’s speech to the Economic Club of Washington on Thursday night.
Powell used the word “patient” or “patiently” five times when referring to the path of interest-rate increases, Dow Jones reported.
Powell’s deputy, Richard Clarida, gave a similar speech in New York, saying US monetary policy, after four rate increases in 2018, is not on a preset course.
Earlier forecasts for US interest rates were that the Federal Reserve would raise the ceiling of its federal funds rate to 3% from 2.5% with two 25 basis point increases in 2019.
The current tone of US central bankers is interpreted as meaning the Federal Reserve will hold interest rates flat in 2019, with some speculating a weakening US economy may even force the Fed to reverse course and start cutting.
Following Thursday night’s speeches by Powell, Clarida and other Fed officials, the rand strengthen by about 4c.
The rand was trading at R13.83/$, R15.94/€, and R17.66/£ at 6.50am.
The growing likelihood of a pause in US interest rate increases cheered Asian markets, helping Tokyo’s Nikkei 225 index to rise 0.95% and Hong Kong’s Hang Seng index to add 0.19%.
Naspers’s dominant asset, Tencent, was 0.85% higher at HK$331.80.
Sydney’s ASX 200 index, however, was down 0.27%, with BHP falling 1% to A$32.80 despite oil prices continuing to rise.
Brent crude was 0.5% higher at $61.56 a barrel, and West Texas Intermediate (WTI) was 0.33% higher at $52.47 a barrel.