JOHANNESBURG — The rand held steady against the world’s major currencies late on Friday, as investors traded cautiously amid heightened risk aversion on global markets.
At 4:15pm, the rand was at R11,5554 against the dollar, little changed from Thursday’s close of R11,5347.
Against the euro, it was at R13,3736 from a Thursday close of R13,4239 and was at R17,5387 to the British pound from R17,5095.
Even the release of United States inflation data, which show consumer prices fell in December, moving further away from the US Federal Reserve’s 2% target, had a muted effect on currency markets. The consumer price index (CPI) declined by 0,4% last month due to the plunge in oil prices.
This is the steepest decline in CPI in six years.
In the past, strong evidence of deflation in the US has encouraged risk taking on expectations the Fed would delay raising US interest rates from near zero levels.
But the reluctance to assume new positions came as no surprise, following the decision by the Swiss National Bank on Thursday to allow the franc to float freely on world currency markets.
The decision caught most investors off guard, putting risk-off trade in motion.
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The Swiss currency, favoured as a safe haven, had previously been pegged to the artificial price of Sf1,20 to the euro for three years.
The floor price was put in place at the height of the European debt crisis in 2011 after increased inflows into Switzerland caused a significant appreciation of the franc, making the country’s exports less competitive.
Event risk is expected to continue next week with the European Central Bank policy decision on January 22, where expectations are that the bank will introduce quantitative easing.
The Greece takes to the polls on January 25 and concerns are that its anti-austerity government may be voted into power, with fears that this may see Greece exiting the eurozone.
— BDLive
