Rand hits 20-month best level vs the dollar

The rand touched its best level against the US dollar for 20-months in trade on Thursday, amid encouraging local data.

In early morning trade, the local unit touched R12.51 against the dollar, its best level since July 2015. By 11h00, it traded at R12.55 against the Greenback.

The rand traded at R13.54 against the euro, and at R15.65 against the pound.

On Wednesday, Statistics South Africa (StatsSA) announced that inflation eased to 6.3% for February, down from 6.6% reported in January.

The rand was further supported by a narrowing of the current account deficit to 1.7% of GDP in the fourth quarter – its lowest in nearly six years.

The US dollar, stocks and commodity prices have wobbled this week for the first time since Donald Trump was elected president of the United States, in November last year, amid expectations that the Federal Reserve will hike rates gradually in 2017.

Fin24 reported that a firmer rand will help the chance for a rate cut before the year’s end.

FNB economist Mamello Matikinca explained that although the South African Reserve Bank’s (SARB) outlook is more bearish, the possibility of an interest rate cut has not been ruled out.

Matikinca explained the persistent rand strength may contribute to a cut. However all eyes are on the Federal Reserve Bank’s (Fed) policy decisions. “We do not anticipate significant rand weakness, however, aggressive policy tightening in the US on the back of rising inflation remains a risk to the rand outlook,” she said.

The rand may strengthen on the back of higher commodity prices as well as global demand and interest rate tightening by the Fed.

Market analyst George Glynos said he expects the rand to continue its bullish run in the short term.

Read: Rand gets even stronger as investors warm up to South Africa

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Rand hits 20-month best level vs the dollar