The rand pushed to its best level against the dollar in nearly two years on Tuesday morning amid signs of easing concerns on US inflation, which is at a 12-year high.
The uncertainty on the outlook for US inflation has been the source of the market angst for better part of a month, with some arguing it is here to stay given the recent pickup in commodity prices, while others say it is transitory.
The upshot is that runaway inflation in the US and more broadly globally could lead to the unwinding of loose monetary policy and higher interest rates in developed markets in particular, which could be net negative for the rand as an emerging-market currency. However, the US Federal Reserve officials have been consistent in their messaging that inflation in the US is likely to be transitory.
With the US dollar weakening broadly against major currencies, the rand benefited as a result, touching R13.87/$ for the first time since July 2019, according to Infront data. It was its best level against the euro since mid-April at R16.9362/€. However, it was steady at against the British pound at R19.71.
In equities, the JSE was mostly likely continue on its recover path, joining its peers in Asia, where Hong Kong’s Hang Seng index was up 1.44% and Japan’s Nikkei 225 up 0.55%.
The JSE has had a rocky month so far, with resource share in particular coming off the boil as a result of a drop in commodity prices. However, commodity prices showed signs of stability on Tuesday morning, with palladium gaining 1% to $2,754 an ounce and Brent crude gaining 0.32% to $68.66 a barrel.