THE rand continued to trade above the R11 to the dollar level yesterday morning as traders awaited the release of key rate decisions from the South African Reserve Bank and the Federal open market committee (FOMC).
At 8:30am the rand was at R11.0556 against the dollar from a previous close of R11,0313 on Friday.
Against the euro‚ the rand was at R14,3183 from a close of R14,2944 previously and was at R17,9479 against the pound from R17,9287 on Friday.
The euro was at $1,2955 from a previous close of $1,2961.
Barclays Research said in an early morning note that it expected the Bank to announce a rate hike at the end of its three-day meeting on Thursday.
Interest rates have already increased by a cumulative 75 basis points this year, after one hike in January and another in July.
However, a BDlive median consensus forecast from a survey of 13 economists was for the repo rate to remain unchanged at 5,75%. Only two of the economists expected rates to increase by 25 basis points.
“We expect rand bears to build on recent gains in the coming days because we are more hawkish than consensus about Tuesday’s local consumer price index (CPI) data and are also in the minority of economists surveyed in expecting the Bank to hike rates,” Barclays said.
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It said a high CPI reading or an increase in local interest rates could cause foreign holders of South African bonds to reduce their exposure and, in so doing, reduce funding available to finance SA’s “stubbornly wide current account deficit”.
“A hawkish FOMC policy statement tomorrow would also hinder the rand’s performance this week,” Barclays said.
The FOMC is scheduled to deliver its statement tomorrow, followed by a press conference with Federal Reserve chairwoman Janet Yellen.
Data have showed steady improvement in various parts of the US economy of late, so many market participants expect the Fed to acknowledge that progress and provide a more clear signal about when it might increase interest rates.
– BDLive
