Rand touches R14 vs the dollar
The rand briefly touched R14 against the US dollar in afternoon trade on Monday as political risk concerns eased.
By 16h45 on Monday, the rand strengthened 1.77% against the US currency, trading at R14.00, while it also strengthened against the euro and pound, to R15.67 (1%) and R18.27 (0.77%) respectively.
“The rand continues to outperform massively,” RMB analyst John Cairns said in a note on Monday. “Effectively, this represents the local risk premium being unwound: more than half of the blowout since the latest Hawks-Gordhan story has been reversed.”
Reuters noted that the rand tested technical resistance at around R14.10, which it said could open path to further gains.
It said that the local unit was gaining alongside fellow emerging currencies as the dollar stumbled ahead of an interest rate decision by the Federal Reserve later in the week.
The Reserve Bank’s monetary policy committee, meanwhile, is expected to deliver its decision on interest rates on Thursday.
“The central bank event risk is concentrated from Wednesday morning through Thursday afternoon,” said Cairns. He said that he expected the Reserve Bank to remain on hold.
“Event risk this week is all about central banks, although almost certainly more about what they say than do,” Cairns said. “The market prices only a 12% chance of the (US) Fed acting (on a rate hike), but we’ll all be watching for signs on whether they will hike in December.”
The analyst said that there is a bigger probability that the Bank of Japan would cuts rates — which would potentially even get the local currency through R14.00 against the dollar.
Talk of removing current finance minister, Pravin Gordhan, meanwhile also subsided temporarily on Monday.
More on the rand
South Africa can still avoid a downgrade to junk: Gordhan
Get ready for R16, R17 or even R19 to the dollar this year: economists
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