Rand weakens against the pound as BOE keeps rates steady
The rand was weaker against the pound on Thursday afternoon after the Bank of England (BOE) kept the interest rate unchanged, as Britain faces the risk of a no-deal Brexit.
The BOE monetary policy committee unanimously voted to keep the rate at 0.75%, in line with market expectations. The central bank said the possibility that Britain will leave the EU without a deal, in less than three months, has led to a depreciation of the sterling exchange rate.
“With the possibility of the UK crashing out of the EU without a deal having increased significantly, the assumption of gradual tightening in monetary policy is no longer realistic,” FXTM chief market strategist Hussein Sayed said in a note.
At 2.20pm, the rand had weakened 0.54% to R17.5387/£, 0.99% to R14.4856/$, and 0.62% to R15.9857/€. The euro was 0.37% weaker at $1.1036.
The rand weakened more that 1% against the dollar in intra-day trade after the US Federal Reserve dampened expectations of a monetary policy easing cycle. The Fed cut the interest rate by 25 basis points and markets have partially priced in another cut at the banks’s next meeting in September.
Gold was down 0.5% to $1,404.60/oz and platinum 1.5% to $851.74. Brent crude was flat at $64.24 a barrel.
The benchmark government 10-year bond was weaker, with its yield rising 7.5 basis points or 0.075 percentage points to 8.385%. Bonds yields move inversely to bond prices.
Locally, the Absa purchasing managers’ index rose to 52.1 points in July from 46.2 in June. Investec economist Kamilla Kaplan said, however, that is is unlikely this rise will be sustainable in the coming months.
Source: businesslive.co.za
