Rand gains 2% in rally against euro dol­lar, pound

Fed grad­u­ally to raise in­ter­est

The Star Early Edition - - NEWS - Ka­belo Khu­malo

THE RAND yes­ter­day shrugged off US Fed­eral Re­serve chair­per­son Janet Yellen’s warn­ing that the cen­tral bank would raise in­ter­est rate at a grad­ual pace and main­tained its bullish mood against a weaker US dol­lar stunned by re­leased e-mails of meet­ings be­tween Pres­i­dent Don­ald Trump’s son and a Rus­sian lawyer last year.

The e-mails put the Trump pres­i­dency un­der fur­ther scru­tiny as the young Trump ac­knowl­edged that he was told be­fore the meet­ing that the lawyer had po­ten­tially dam­ag­ing in­for­ma­tion on Hil­lary Clin­ton.

The e-mails ap­par­ently came from of­fi­cials in Moscow as part of an ef­fort to help Trump’s pres­i­den­tial cam­paign.

The rand gained nearly 2 per­cent against the green­back to trade at R13.2703 by 5pm, while it firmed to R17.1031 against the pound and R15.1574 against the euro.

Tif­fany Pol­lock, an an­a­lyst at Mer­chant West, said that the rand had strength­ened on the back of po­lit­i­cal noise from the White House that had put the green­back on the back foot.

Pol­lock said the global mon­e­tary pol­icy en­vi­ron­ment would be in­struc­tive for the rand in the next ses­sions.

“For­eign in­vestors seem to see the rand weak­ness as an op­por­tu­nity. While sen­ti­ment lo­cally has be­come very bear­ish, for­eign­ers have been pick­ing up bonds ag­gres­sively,” Pol­lock said

“While we usu­ally do not care about Cana­dian mon­e­tary pol­icy, if the Bank of Canada goes through with its first hike since the cri­sis yes­ter­day, then the yields pres­sure may mount even fur­ther. On the con­trary, the Bank of Ja­pan on Fri­day fought back against the rise in yields by pro­vid­ing mas­sive liq­uid­ity,” Pol­lock said.

Canada’s cen­tral bank was ex­pected to hike in­ter­est rates for the first time since 2010, sig­nalling the tight­en­ing of mon­e­tary pol­icy in de­vel­oped economies af­ter the Euro­pean Cen­tral bank and Fed stance.

In her semi-an­nual tes­ti­mony on the econ­omy, Yellen took note of a num­ber of en­cour­ag­ing fac­tors, in­clud­ing strong job gains and ris­ing house­hold wealth that she said should fuel eco­nomic growth over the next two years.

She blamed a re­cent slow­down in in­fla­tion on tem­po­rary fac­tors. But she says Fed of­fi­cials are watch­ing de­vel­op­ments closely to make sure that an­nual price gains move back to­ward the Fed’s 2 per­cent tar­get.

“Con­sid­er­able un­cer­tainty al­ways at­tends the eco­nomic out­look,” Yellen said in her pre­pared speech for the US House Fi­nan­cial Ser­vices Com­mit­tee.

“There is, for ex­am­ple, un­cer­tainty about when – and how much – in­fla­tion will re­spond to tight­en­ing re­source utilisation.”

She in­di­cated that the US was com­mit­ted to re­duce its $4.5 tril­lion (R60.88trln) bal­ance sheet it had built up dur­ing and af­ter the 2008 fi­nan­cial cri­sis and ex­pected the Fed to keep rais­ing in­ter­est rates at a grad­ual pace.

The sharp re­trace­ment of the rand yes­ter­day pro­vided a slight re­lief for the lo­cal unit that has been bat­tered since last week af­ter the rul­ing ANC took a pol­icy de­ci­sion to change the own­er­ship of the South African Re­serve Bank while it af­firmed the in­de­pen­dence of the cen­tral bank.

The lo­cal unit has lost be­tween 4 per­cent and 10 per­cent of its value against other risk cur­ren­cies in the past month, with 4 per­cent be­ing against other emerg­ing mar­ket cur­ren­cies and 10 per­cent against the dol­lar bloc cur­ren­cies of Aus­tralia, New-Zealand and Canada.

Al­let Op­per­man, an an­a­lyst at Trea­suryOne, said that over the past cou­ple of weeks, the rand has lost al­most 60 cents against the US dol­lar and close on a rand against the euro.

PHOTO: REUTERS

The South African rand has re­gained some of its lus­tre against the dol­lar, pound and euro yes­ter­day.

US Fed­eral Re­serve Board chair­per­son Janet Yellen re­mains in a bullish mood.

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