Rand recovers a little after overnight pummelling by dollar

The rand was stronger against the dollar on Wednesday afternoon, and some way off its weakest level of the day, as it recovered from its overnight plunge.

The rand had been on a steady recovery recently, touching a two-month high of R13.07/$ early on Tuesday, before tumbling to R13.39.

This followed a late-night televised address by President Cyril Ramaphosa, in which he confirmed that the ANC would seek to change the Constitution to allow for the expropriation of land without compensation.

“We think that the market reaction was overdone, but a poorly managed process will boost market volatility,” Capital Economics analysts said.

FXTM analyst Lukman Otunuga said the speech may have fuelled concerns of heightened political uncertainty in SA. “Consequently, it erodes sentiment toward the rand.”

The rand was also negatively affected by a stronger dollar in anticipation of the US Federal Reserve’s interest-rate decision in the evening. No change is expected, but Fed officials might provide further clues on the rates trajectory for the remainder of 2018. Higher rates tend to attract investors to a currency.

The dollar extended gains in Europe after it snapped a two-day losing streak on Tuesday, Dow Jones Newswires reported.

“Markets will be looking for any clues in the bank’s language that could indicate a bias towards a potentially more rapid pace of rate hikes in the future,” chief market analyst at Commonwealth Foreign Exchange, Omer Eisner, said in a note Tuesday.

The Fed has already increased rates twice in 2018 and officials have indicated two more could be in the offing if the US economy continues on its current growth path.

At 2.58pm the rand was at R13.2176 to the dollar from R13.2693, at R15.4479 to the euro from R15.5141 and at R17.3656 to the pound from R17.416.

The euro was at $1.1688 from $1.1692.

Local bonds were weaker with the R186 bid at 8.625% from 8.575%. The US 10-year treasury was last seen at 2.9994% from 2.9621%.