Another interest rate cut could give the rand some much-needed impetus

DURBAN – While the performance of the rand this week would be closely linked with the global risk sentiment, analysts believed it could react positively to another interest rate cut.

The domestic currency firmed as it ranged between R18.35 to R18.61 to the dollar on Monday.

At 5pm the rand was bid 17c stronger than the same time bid on Friday at R18.40 against the dollar. Against the pound, it was 3c stronger at R22.46 and bid at R20.06 against the euro. 

Global head of market research and currency strategy at FXTM Jameel Ahmad said due to very weak global demand and the impact this would have on an open economy such as South Africa’s, it was very much on the cards that the SA Reserve Bank could cut interest rates once again when they meet later this week.

It certainly should not be ruled out. “It is no hidden secret to anyone that South Africa’s fundamentals are very weak and this position will only face deeper threats when global economic weakness rings home, meaning unemployment rates will face a large stretch and sadly a lot of domestic businesses will question whether they can survive,” said Ahmad.