Rand gains as dollar rally pauses

The rand got a reprieve on Tuesday morning in line with other currencies, as the recently outperforming dollar lost a bit of momentum.

The uncertain global environment has benefited the greenback, which acts as a safe-haven currency. Investors continue to be jittery about the US-China trade dispute, the budget standoff between Italy and EU, as well as Brexit.

The US economy also has been doing relatively well, enabling the US Federal Reserve to increase interest rates, further boosting the value of the dollar at the expense of other currencies.

“This rally in the greenback is going to ask a lot of questions over the resilience of its counterparts, but the largest risk that investors will probably be evaluating is what does this mean for emerging markets?” said Jameel Ahmad, global head of currency strategy and market research at FXTM.

The rand is still down 16% against the dollar so far in 2018, according to Iress data, hurt in part by bond outflows, which amount to more than R55bn. A weaker rand has the potential to stoke high inflation, though it boosts the tourism sector and other export-oriented sectors. 

At 10.02am, the rand was at 0.63% stronger against the dollar at R14.3905, 0.48% stronger against the euro at R16.1641 and 0.37% stronger against the pound at R18.5337. The euro was 0.32% better at $1.2846.

Local bonds were weaker, with the yield on the benchmark R186 bond rising to 9.23%, from 9.21% at its last settlement.