Rand goes from weakness to stability

THE RAND weakened against a stronger dollar in early trade yesterday as investors shifted focus from domestic economy woes to the outcome of the US Federal Reserve’s policy meeting for clues about future tightening.

The rand is struggling to recover from heavy losses suffered last week after Finance Minister Malusi Gigaba painted a bleak picture of the economy in his budget speech.

“Global factors have started to drive rand moves again as the distance from the budget grows,” Rand Merchant Bank analyst John Cairns wrote.

“USD/ZAR’s upside yesterday timed with that in other risk currencies, although the move sizes have remained extraordinary, reflecting the ongoing edginess in the market.”

Nedbank analysts said foreign exchange markets were likely to remain cautious and non-committal ahead of the US central bank interest rates decision.

Stocks were set to open higher, with the JSE securities exchange’s Top-40 futures index up 0.59 percent.

In fixed income, the yield for the benchmark government bond due in 2026 was steady at 9.105 percent.

However, the rand was firmer yesterday, boosted by positive economic data and a return of investors attracted by the low exchange rate and high bond yields ahead of an interest rate decision by the US central bank.

Stocks rallied to new highs, tracking global markets and buoyed by mining shares.

At 3.10pm the rand had gained 0.3 percent to 14.0725 per dollar, up from a close of 14.1150 overnight in New York. The rand climbed to a session best of 14.04 before paring gains slightly, but remained in demand as investors anticipated the Federal Reserve would keep lending rates unchanged at its meeting later in the session.

Locally, new vehicle sales figures for October brought some good news after last Wednesday’s medium-term budget revealed the country’s spending deficit and public debt were increasing at a faster pace than expected.

Data from the government trade department showed new vehicle sales rose 4.6 percent year-on-year to 51 037 in October.

“The rand is taking direction from a slightly risk-on environment as markets await the Fed’s policy statement,” said economist at ETM Analytics, Halen Bothma.