Rand extends recovery as dollar falters on Donald Trump’s comments

The rand gained further ground on Wednesday afternoon, helping to alleviate concerns of another potential increase in fuel prices early in September.

A series of fuel-price increases in 2018 has led to record highs, which are contributing greatly to inflation.

The consumer price index (CPI) rose to its highest level in nearly a year in July — 5.1%, up from 4.6% in June — into the upper end of the South African Reserve Bank’s 3% to 6% target range.

Though still much weaker in the month to date, the rand has pulled back significantly from its recent worst level of more than R15 to the dollar.

Investec economist Annabel Bishop said in a note that the Bank could strike a more hawkish tone during its scheduled meeting in September, meaning that it could flag potential increases in rates in future meetings, given the volatility in the rand.

The rand’s recovery on Wednesday came courtesy of a weaker dollar, after US President Donald Trump took a swipe at the US Federal Reserve for its intention to raise borrowing costs further.

The Fed is among a handful of central banks in developed economies that has been on a rate-hiking cycle since late 2015, though the pace of the increases has been moderate.

Higher US rates have tended to boost the value of the dollar at the expense of the rand and other high-yielding currencies, which benefited from the ultralow interest-rate environment following the 2008-2009 global financial crisis.