Rand slips in line with euro as risk-off sentiment returns to the market

The rand was weaker against the dollar but firmer against the euro and pound, on Wednesday afternoon, with data releases giving the market direction.

Earlier, a flash eurozone purchasing managers index (PMI) reading for May disappointed, weighing on the euro, which the rand usually tracks.

This was the fifth consecutive month of lower readings for the eurozone, and the lowest reading in 15 months, showing that growth in the region had stalled and showed no signs of stabilising, said BK Asset Management MD Boris Schlossberg. “The news has to be a concern to the European Central Bank (ECB), which is trying to normalise policy and begin a taper of quantitative easing.”

Earlier, local data was rand-supportive, with inflation for April coming in at 4.5% compared to the 4.7% consensus expectation. The rise in inflation from 3.8% in March, however, was broad-based, with eight out of the 11 major price categories registering increasing inflation, said Capital Economics analysts.

Due to rising inflation and the recent fall in the rand, the South African Reserve Bank was likely to keep interest rates on hold on Thursday.

At 3pm, the rand was at R12.5703 to the dollar from R12.6301, R14.7734 to the euro from R14.8046, and R16.8233 to the pound from R16.8860. The euro was at $1.1698, from $1.1778.

The yen, which is seen as a safe haven, had firmed more than 1% against the dollar on Wednesday afternoon. The Turkish lira remained under pressure, slipping a further 4% against the dollar. Analysts said the fall in the Turkish lira was weighing on other emerging-market currencies.