Weaker dollar helps rand rise to pre-Covid-19 levels

The rand held steady against the dollar on Thursday morning, after racing to its best level in more than a year, while the JSE could battle at the opening bell with most of the key Asian markets in the red.

The relatively stronger rand, which came as a result of a weaker dollar, would likely act as a cushion against what appears to be building inflationary pressures, thus helping the Reserve Bank keep interest rates at record low as the economy continues to struggle.

The rand, a highly tradable currency in the emerging markets, rallied to a high of R14.36/$ in the US session, its best level since January 2020, according to Bloomberg data. In morning trade, the rand was flat at 14.40/$.

Investec chief economist Annabel Bishop said in a note that markets are displaying exuberance on the perceived strength of US economic recovery, leading to risk-on sentiment, which helps the rand.

“But rapid swings in financial market sentiment towards risky assets in either direction are common,” she said.

“Consequently, the domestic currency will remain erratic, swinging rapidly both stronger and weaker, as global market events continue to impact its direction.”

Local inflation pressures appear to building, after fuel prices hit a record high at the start of April, while power utility Eskom increased tariffs by 15%.

The consumer price index eased to an annual 2.9% in February, down from 3.2% in January and the lowest rate of inflation since June 2020.

In stock markets, Hong Kong’s Hang Seng was down 1% in early trade, but Japan’s Nikkei 225 was flat, after a mixed session on Wall Street. 

Source: businesslive.co.za