Rand hovers at two-week highs as Fed strikes dovish tone

The rand hovered at a two-week high against the dollar on Monday morning, backing the case for a potential cut in fuel prices in the near term. The price of Brent crude was off 4% in August, according to Infront data.

After touching a five-month low of R15.39/$ just more than two weeks ago, the rand changed hands at R14.72/$ on Monday morning, indicating the volatile nature of the currency that is a proxy of sentiment towards emerging markets because of its highly liquid status.

US Federal Reserve chair Jerome Powell’s speech on Friday that the markets interpreted as dovish boosted the rand’s recovery.

Addressing an annual event at Jackson Hole in the US, the Fed chair said a decision to taper its $120bn-a-month bond buying programme is data dependent, citing the labour market in particular. Significantly, he noted the tapering of the stimulus will not necessary herald the beginning of a rise in interest rates. 

The US central bank will also monitor the potential risks posed by the highly transmissible Delta variant, Powell said in a prepared speech.

The rand’s strength curbs the cost of imports, though it hurts revenues of exporters.

Elsewhere, stock markets were higher in Asia, after Wall Street hit record highs on Friday.

Commodity prices were broadly higher thanks to a weaker dollar, with palladium gaining 0.35% to $2,427.00oz, but gold price was flat at $1,817.96.

In SA, the week will be packed with corporate results, including those of Old Mutual, Aspen and Impala Platinum.

mahlangua@businesslive.co.za