Rand firms against dollar’s weakness
THE RAND was somewhat sure-footed yesterday after US President Donald Trump’s potshot at Federal Reserve chairperson Jerome Powell over interest rates weighed on the dollar, allowing the domestic currency to trade in a range of between R14.26 and R14.46.
Meanwhile, the inflation figures had little impact on the rand with the consumer price index (CPI) 5.1% year on year in July 2018 from 4.6% in June, the 16th consecutive month below the SA Reserve Bank’s upper-target level of 6% but somewhat higher than market expectations of 5%.
Corporate treasury manager at Peregrine Treasury Solutions, Bianca Botes, said earlier higher-than-expected CPI figures would surely put pressure on the rand and interest rate hikes will become a reality. “While inflation is expected to have bottomed and an approach towards the upper band of the inflation target range is expected, the weak rand is likely to accelerate this move which will see already strained consumers come under further pressure,” said Botes.
At 5pm, the domestic currency was bid 6c firmer than Tuesday’s same time bid at R14.30 a dollar. Against the pound sterling the rand was 1c stronger at R18.45 and to the euro, the currency eased 4c to R16.58.
NKC analyst Elize Kruger said the CPI release surprised slightly on the upside, mostly reflecting higher administered prices and further fuel price increases.
“Given the rand exchange rate’s renewed depreciation in the past week, the risk of higher import price pass-through has also increased. However, the pass-through of rand depreciation has proved to be limited in past periods of depreciation when local demand is dismal, as retailers then typically have limited pricing power.”
TreasuryONE senior currency dealer Andre Botha said emerging markets had retraced some of the losses they had suffered in the past two weeks and the rand did not miss the boat. “With the risk of Turkey diminishing due to their public holidays we expect the sentiment to be pro-emerging markets and the rand could stage a recovery.”
Botha said all eyes were on Parliament’s Q-and-A session by President Cyril Ramaphosa, which held sentiment risk due to the focus on land reform and the way he responded. – BUSINESS REPORT ONLINE