Market Report: Despite stronger rand financial markets stays nervous

By Chris Harmse

PRETORIA – The dollar started its long expected depreciation last week. Expectations around the US elections and policies to further stimulate the world biggest economy contributed to the dollar starting to lose its value against most currencies, especially at the end of last week.

On Friday the US currency lost 1.2 percent against the pound ($1.34) and 0.70 percent against the Euro ($1.19). On opening the Jackson Hole symposium on Friday Federal Reserve chairperson Jerome Powell gave a robust updating of the Fed’s monetary policy framework.

The Fed’s new approach could be viewed as a flexible form of average inflation targeting, allowing inflation to run moderately above or below the Fed’s 2 percent target for some time. This means that interest rates could be left lower for a longer period despite a rise in inflation. This gave a spark for the dollar to move weaker, a step that many US policymakers would like to happen.

The effect of the Powell presentation on the South African markets was that the Rand appreciated strongly against the dollar, euro and pound last week. Against the dollar the rand improved by 54 cents to R16.57 a dollar from the R17.11 the previous Friday. Against the pound the rand improved by 40c to R22.12 and against the euro with 33c to R19.83.

Source: iol.co.za