Rand on track for best month since January, but still ‘undervalued’

The rand was steady against major global currencies on Friday afternoon as investors waited for weekend developments.

The currency is looking set to have its best month against the dollar since January.

The rand, along with other emerging-market currencies, has benefited in June from a dovish tilt by the US Federal Reserve. Expectations are high that the Fed will cut rates in coming months.

At 3pm the rand was 0.14% firmer at R14.1454/$, and has gained 3% so far in June.

It was flat at R16.1029/€ and R17.9665/£ on the day, while the euro was little changed at $1.1387.

Internal calculations put the rand’s undervaluation at about 14%, said Mercato Financial Services analyst Nico du Plessis in a note. This was not to say this would be unwound, as there is still a buffer of risk to work with.

“It is conceivable for the rand to dip materially back below [the] R14/$ handle through the months ahead, and maintain a healthy risk premium to compensate foreign investors for exposure to SA assets,” Du Plessis said. This potential recovery, amid a broader bearish trend, should not be dismissed.

International focus on Friday was squarely on the forthcoming meeting between US President Donald Trump and Chinese President Xi Jinping on Saturday. That meeting is expected to give investors a clear sign of how the US-China trade war will unfold next, with escalation or a truce possible.

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Source: businesslive.co.za