Rand breaks through R12 to the dollar for first time since May 2015
The rand’s positive move comes as the euro gains on the dollar following upbeat eurozone data
The rand broke through R12 to the dollar at midday on Wednesday as the euro gained on the dollar following upbeat eurozone economic data.
A weaker dollar usually results in a stronger rand, with local political factors playing a lesser role on the day. ANC president Cyril Ramaphosa is attending the World Economic Forum meeting at Davos.
The euro firmed in anticipation of a more hawkish stance from the European Central Bank (ECB) at its meeting on Thursday. This would be justified by positive economic data that would reflect strong economic growth in the area, analysts said.
Consumer confidence in the region rose by 1.3 points in January, which was well above the market consensus of 0.6 points and the highest level since August 2000. The pound also hit $1.40 on the day, on optimism over the UK economy.
The market is now awaiting purchasing managers’ index (PMI) data later in the day, which will reflect business conditions affecting employment, production, new orders, prices, supplier deliveries and inventories in the manufacturing sector, giving an advance indicator of economic health, FxPro analysts said.
“Eurozone assets can be influenced by this data release,” FxPro said, with a positive number set to support the euro further.
If the rand breaks through R11.95 to the dollar, R11.70 is the next target.
The weak dollar has been the main story so far this morning, TreasuryOne dealer Gerard van der Westhuizen said. “But other factors remain important, such as the build up towards the budget in February, and the fate of President Jacob Zuma.”
The rand showed little reaction to consumer inflation released in the morning. The consumer price index (CPI) rose 4.7% in December 2017 compared with December 2016, Statistics SA said. This follows a 4.6% year-on-year increase in November.
The strengthening of the rand against the dollar will push down import costs, and inflation will ease further in the first half of 2018, analysts at Capital Economics said.
They have forecasted inflation will average 5.1% in 2018, down from 5.3% in 2017.
At 11.30am, the rand was at R11.9362 to the dollar from R12.0333, at R14.7393 to the euro from R14.7987, and at R16.8236 to the pound from R16.8456.
The euro was at $1.2349 from $1.2298.