Rand recovers a tad as it takes cue from global markets

The rand staged a slight comeback on Friday morning, taking its cue from the overseas markets.

The euro fared better against the dollar in early trade, with markets appearing to have absorbed the implications of the European Central Bank’s (ECB) surprise pledge on Thursday to keep interest rates lower for the next 18 months.

The euro initially took a big knock on the announcement by the ECB, which also disclosed that its unconventional monetary policy stimulus, known as quantitative easing, would be phased out in December.

“The kicker to the statement was that interest rates [would not change] for at least 18 months, which makes the US the shining light in the world economy as they have decent growth while in an interest-rate hiking cycle,” TreasuryOne currency dealer Andre Botha said.

The slightly better euro played out positively for the rand, though not enough to shake the latter’s losses for the week.

The rand has been at the mercy of unforgiving global developments over the past three months, though local developments have also added a negative tone.

Power utility Eskom’s decision to implement power cuts conspired to push the rand to lows of R13.48/$ on Thursday, its lowest point since mid-December, before bouncing back slightly.

“The threat of power outages is worrying at the time when we are battling to find bright spots in the economic data,” said Halen Botha, market analyst at ETM Analytics.

Eskom started load shedding for the first time in years on Thursday night due to constraints to supply as a result of industrial action.

The weaker rand fuels inflation, though it gives exporters a competitive edge.

Local bonds were weaker in early trade, with the yield on the benchmark R186 fetching 8.98% from its last settlement of 8.93%.

At 10.39am, the rand was at R13.3986 to the dollar from R13.4592, R15.5289 to the euro from R15.5656 and R17.7743 to the pound from R17.8535. The euro was at $1.1590 from $1.11570.