Rand hits near-three-month low

The rand touched its worst level in almost three months on Monday as the US dollar was supported by uncertainty about interest rate cuts in the US.

The local currency is facing pressure from the resilient dollar as the US Federal Reserve indicated a prolonged period of elevated interest rates, said RMB analysts. “The US economy’s robustness and the prudent stance of the central bankers have moderated the prospects of fast interest rate cuts, supporting the dollar.”

According to CME Group’s FedWatch Tool, traders are now pricing in a roughly 46% chance of a Fed rate cut in March, which marks a steep drop from almost 81% a week earlier. There’s also a nearly 54% likelihood that the Fed will keep rates steady, up from about 19% one week prior.

“The rand continues to disappoint as US rates continue to be hotly debated after higher-than-expected inflation numbers over the course of the [last] week are pushing out any expectations of cuts to the second half of 2024,” said RMB head of forex execution Matete Thulare.

“Activity remains quiet as exporters remain hedged above R19/$ and importers waiting patiently for the rand to improve.”

At 6.03pm the rand had weakened 0.72% to R19.1847/$ having touched R19.2062, its worst level since October. It had weakened 0.8% to R20.8829/€ and 1.13% to R24.3888/£. The euro was 0.1% weaker at $1.0886.

Adding to the poor sentiment, key export commodity prices are lower and weighing on the currency. “News of capital outflows from both the local bond and equity markets last week, as reported by the JSE, would have further hampered sentiment,” said Shaun Murison, senior market analyst at IG.

SA inflation data is due on Wednesday and the Reserve Bank’s interest rate decision on Thursday. It is expected the Bank will keep rates on hold.

The JSE all share index lost 0.43% to 72,351.50 points and the top 40 shed 0.48%. Industrial metals lost 0.93%, retailers 0.82%, banks 0.79%, resources 0.72% and financials 0.6%.

At 6.10pm, the Dow Jones industrial average was 0.42% firmer, while in Europe, the FTSE 100 added 0.4%, France’s CAC 40 was up 0.64%, while Germany’s DAX advanced 0.65%.

Gold lost 0.37% to $2,022.05/oz and platinum eased 0.49% to $897.62oz. Brent crude was 1.69% firmer at $79.66 a barrel.