The rand had gained more than 1% against the dollar on Friday afternoon, as the euro recovered in risk-on trade ahead of a long-awaited speech later in the day by US Federal Reserve chair Jerome Powell.
Most analysts expect Powell to reiterate the Fed’s rate-hiking path, Dow Jones Newswires reported. A few, however, believe he might surprise with a more dovish stance following President Donald Trump’s recent comment that he is “not thrilled” by the Fed’s interest-rate hiking policy.
Should Powell stick to the central bank’s recent rhetoric, the rise in the euro, which the rand usually tracks, could be capped at $1.16, the newswire said.
The rand has lost about 15% on the dollar in 2018. It is expected, however, to recover from periodic bouts of weakness, including the recent fall brought on by the Turkish economic crisis, which saw the lira weaken substantially against the greenback.
Capital Economics analysts said the rand and Brazilian real tended to fare poorly during times of market volatility because they were liquid and widely traded. External financing requirements seemed to be the best determinant of the extent to which emerging-market currencies weakened during the latest sell-off.
“Turkey and Argentina are by far the most vulnerable emerging markets on every measure of financing needs,” they said.
At 2.58pm, the rand was at R14.2497 to the dollar from R14.4082. It was at R16.5146 to the euro from R16.6335 and at R18.312 to the pound from R18.4701.
The euro was at $1.1589 from $1.1543.
Local government bonds were firmer, with the benchmark R186 last bid at 8.895% from 8.935%.
The US 10-year treasury was last seen at 2.8396% from 2.8279%.