Rand rallies to three week high ahead of interest rate decision
The rand gained further momentum against a softer dollar in morning trade on Tuesday – trading at a three week best level ahead of a slew of local data, including a decision on interest rates later this week.
The dollar has struggled against the major currencies after the Republican party’s latest effort to replace ‘ObamaCare’ health insurance failed to gather enough support, raising questions about how president Donald Trumps’ future agenda will fare.
At around 08h30, the rand traded at the following levels against the major currencies:
- Dollar/Rand: 0.22% firmer at R12.90
- Pound/Rand: 0.14% firmer at R16.85
- Euro/Rand: 0.04% firmer at R14.86
The rand’s recovery comes after South African minister of mineral resources Mosebenzi Zwani announced government’s new position on mine ownership in the country in mid-June, saying that 30% of all mines need to be black-owned.
On Friday, however, the ministry said it had suspended the implementation of new mining laws, which helped mining shares recover some of their earlier losses.
Locally, Statistics South Africa will releases June CPI data and May retail sales data on Wednesday, while the South African Reserve Bank is set to deliver its rates decision on Thursday.
The Sarb is expected to leave interest rates unchanged at 7%, according to a Reuters poll. Only two of 27 economists predicted a 25-basis- point cut, while one expects the repo rate to be cut by half a percent.
South Africa’s economy is expected to expand 0.7% in 2017 and 1.2% in 2018, having slipped into recession in the first quarter.
“While our consumer price index view indicates that the Sarb has room to ease rates from as early as next week, it will first look to change its inflation rates narrative before pulling the trigger,” Jeffrey Schultz, an economist at BNP Paribas, told Reuters.
The rand is expected to end this year around 13.60 per dollar, Reuters said.
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