Rand hits R16 to the dollar
South Africa’s rand strengthened below R16.00 per dollar, erasing its Iran war losses.
The rand, often seen as a proxy for developing-nation assets, gained 0.8% to R16 per dollar as the greenback weakened to a three-month low after the US Treasury announced debt buybacks to push yields lower.
South Africa’s currency slumped to a four-month low in March as the Middle East conflict drove oil prices higher.
It clawed back some losses before losing ground again in July after the South African Reserve Bank held back on raising interest rates in a surprise decision.
The rand was trading around R16.10/$ on Thursday (20 August), down from R16.25/$ earlier in the week.
It strengthened in early trade on Friday, hitting R16.05/$ as the dollar weakened.
According to Investec Chief Economist, Annabel Bishop, the rand has been boosted by the release of the minutes from the Federal Open Market Committee (FOMC).
The FOMC minutes showed that the US Fed views the inflation outlook in the world’s largest economy as highly uncertain, with risks to the upside.
This led to the Fed holding US interest rates in July, with the prospect of future rate hikes waning.
This, in turn, weakened the dollar, boosting the rand and other emerging-market currencies.
“With the FOMC minutes positioning a less hawkish stance than previously, and with a large, detailed quantity of information…financial markets [became more] risk-on,” Bishop said in a note on Thursday.
With Bloomberg
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