Rand weakens as the dollar gains on euro
The rand was weaker on Wednesday afternoon as the dollar gained on the euro ahead of the release of the US Federal Reserve’s federal open market committee (FOMC) minutes later in the day.
The minutes are likely to re-affirm the Fed’s hawkish stance on interest rates, despite earlier criticism from US President Donald Trump that the Fed is “crazy” to continue with its interest-rate hiking strategy.
The dollar also gained on the euro as it seems increasingly likely that a Brexit deal between the EU and the UK will not be reached at the EU summit in Brussels.
A “no-deal scenario” is looking increasingly likely after EU Council president Donald Tusk said on Tuesday that he harboured “no grounds for optimism” which could roil eurozone markets and produce sharp swings in the pound, Dow Jones Newswires reported.
The biggest snag in EU-UK discussions may centre on the issue of trade between Ireland and Northern Ireland, the latter being part of the UK. The UK is slated to leave the EU on March 29 next year and talks are expected to be completed by mid-November.
However, analysts say much of the weakness in the euro has already been priced in. If the euro doesn’t break from the present range to go higher, it would be “a worrying sign for us”, ING analysts said in a note. “We are surprised that the euro isn’t doing better, given that emerging-market currencies are showing signs of recovery and the dollar is consolidating.”
Further losses in the rand were capped by better-than-expected retail sales data for August, released earlier in the day. Retail sales rose an annual 2.5%, from an upwardly revised 1.4% in July and much higher than the expected 0.3%.
At 2.56pm, the rand was at R14.2388 to the dollar from R14.1646, at R16.4206 to the euro from R16.395, and at R18.6652 to the pound from R18.6754. The euro was at $1.1531 from $1.1574.
Local bonds edged firmer with the yield on the R186 bid at 9.145% from 9.165%. The US 10-year treasury was last seen at 3.1507% from 3.1648%.
Source: businesslive.co.za
