Rand takes a breather after strong run last week
The rand was little changed on Tuesday morning, showing signs of consolidation after recovering strongly in the past week. The value of the local currency gained 4% against the dollar, in its biggest weekly gain since December.
But its recovery may have come too late to stave off the expected increases in fuel prices in October.
The situation is not helped by elevated international oil prices, as Brent crude crossed the $80 a barrel mark for the first time in four years, after major producers reportedly opted not to increase supplies during their scheduled meeting at the weekend.
Three weeks ago, the Central Energy Fund said that a weaker rand and a higher international oil price led to an under-recovery for all grades of fuel of more than R1 a litre, in the first 10 days of September, putting motorists in line for yet another hefty fuel price increase.
The rand has been particularly volatile for the better part of the month, plunging to a two-year low of R15.68/$ at one stage before coming back to R14.35/$.
Poorer sentiment towards emerging markets and shock local GDP data earlier in September contributed to wild swings in the currency, though it has since stabilised. The outcome of the US Federal Reserve meeting late on Wednesday has the potential to determine near-term direction for the rand, whose strength helps keep inflation in check.
Markets will closely monitor the US Fed’s language for guidance on how it is likely to approach its policy in the future. The US Fed has been on a hiking cycle since 2015, boosting the value of the dollar at the expense of other currencies.
The rand and other high-yielding emerging markets have previously benefited from the low interest-rate environment in developed markets through carry trade — where money is borrowed in low interest-rate environments and subsequently invested in currencies that offer high returns.
At 8.58am, the rand was at R14.3547 to the dollar from R14.3684. It was at R16.8790 to the euro from R16.8770, and at R18.8134 to the pound from R18.8535. The euro was at $1.1758 from $1.1746.
Source: businesslive.co.za
