Rand slightly stronger ahead rates decision in the US

The rand held steady at relatively stronger levels on Monday afternoon despite the uncertain global environment, which typically drains appetite for assets deemed risky.

The relative strength in the value of the local currency came courtesy of a weak dollar, which is in the spotlight on the eve of the interest rates decision by the US Federal Reserve.

The Fed is widely expected to raise rates by 25 basis points when its federal open market committee concludes a two-day meeting on Wednesday, but the market focus will be on its outlook for 2019.

“The [dollar] retreat is particularly interesting given the widespread expectation that the Fed is set to lift rates,” said Nico du Plessis, analyst at Mercato Financial Services “Not only does this give us some insight into just how much has been priced in, but it also highlights the possibility that the Fed might reach the pause button, given the growing number of headwinds becoming more prominent with each passing month.”

The headwinds include the higher stock market volatility and the still unresolved US-China trade dispute and its potential effect on the broader US economy.

The uncertain global environment has recently led to wild swings in the rand, which is highly sensitive to shifts in global sentiment.

Investors have, in the recent past, showed signs of angst over the health of the global economy, leading to a big sell-off in risky assets, most notably equities.