Rand holds steady as trend is still difficult to decipher

The rand was relatively stable on Wednesday morning, though the uncertain global environment continues to cast a shadow on its outlook.

The local currency has been highly volatile in recent days, making it difficult to decipher a trend.

The volatility in the rand comes amid a fall in international oil prices, which bodes well for the outlook on inflation. Brent crude hovered at about $65 per barrel in early trade, its lowest level in eight months, having plunged more than 20% since reaching $86 a barrel in early October.

“A simple line graph of the Brent crude oil price reflects the sheer panic that has set in over the swelling supplies against a backdrop of waning demand,” Rand Merchant Bank analyst Nema Ramkhelawan-Bhana said in a note to clients.

The strength in the rand could lead to a cut in fuel prices in December, which would be a relief to hard-pressed consumers and businesses. But any further weakness in the currency could negate the net positive effect of lower oil prices.

Brexit was at the centre of focus, after the UK and EU reportedly reached a draft deal. On Wednesday afternoon, UK Prime Minister Theresa May will  present the yet-to-be released details of the deal to her cabinet.

The pound and JSE-listed companies in particular have felt the fallout of Brexit. The Brexit breakthrough could boost the rand via positive global sentiment.

At 10.02, the rand was at 0.19% stronger against the dollar at R14.4284, 0.21% stronger against the euro at R16.2870 but was flat against the pound at R18.7341. The euro was equally flat $1.1288.

Local bonds held steady, with the yield on the benchmark R186 bond at 9.23%, unchanged from its last settlement.