SA rand weakens

JOHANNESBURG. — The rand retained its softer bias against major currencies shortly before midday yesterday, as investors waited for direction from central bank policy makers later in the day.

Expectation of global monetary policy tightening later in 2017 has waned recently, amid a spate of soft economic data out of the US and Europe.

In SA, where all economic metrics except risk to the rand point to an interest-rate cut, the Reserve Bank is expected keep the repo rate at 7 percent.

The decision is likely to have been split this time, as a cut is the next logical move, TreasuryOne currency dealer Andre Botha said.

Beyond political risk to the rand, including pressure to nationalise the Bank, the scaling back of quantitative easing in Europe and the US could weaken the rand later in 2017, said Rand Merchant Bank analyst Isaah Mhlanga. A weak rand usually leads to inflationary pressures due to the increased cost of imports, such as fuel. Trading in European markets was expected to be cautious ahead of the European Central Bank (ECB) policy statement later on yesterday, analysts said. The Bank of Japan (BoJ) announced earlier that it had kept its monetary policy steady and had pushed back its forecast for reaching a 2 percent inflation rate.

At 11.30am the rand was at 12,9575 to the dollar from Wednesday’s 12,9174‚ at 14,9043 to the euro from 14,8747 and at 16,8109 to the pound from 16,8229. The euro was at $1,1502 from $1,1515.