Following a temporary dip due to geopolitical tensions, the rand has rebounded, showcasing resilience against the dollar as markets digest the Fed's latest decisions
Image: Picture: Henk Kruger/Independent Newspapers
After Wednesday’s wobble in the local currency, mostly the result of a fire fight between India and Pakistan, the rand reversed its losses, instead moving back to a position where it continues to gain ground against the dollar.
This stabilisation comes despite the US’ Federal Reserve holding interest rates steady, which seems to have been priced into valuations across markets even though the States’ central bank may have scope to cut interest rates.
Between its New York close and mid-morning on Wednesday, the local currency had dropped some 20c after having traded at the R18.15 level in New York on Tuesday night. On Thursday, however, the currency was increasing in strength, wand was in the R18.16 range – its lowest level in a month – just after lunch.
Bianca Botes, Director at Citadel Global, stated that, although risk sentiment remains mixed, the rand opened steady at R18.22 on Thursday morning.
Nolan Wapenaar, co-chief investment officer at Anchor Capital, said the last 24 hours were a non-event.
“Black smoke in the Vatican and a Fed hold were very broadly anticipated. The silence in conclave and as expected Fed commentary mean that we are business as usual,” said Wapenaar.
Anchor Capital, he noted, will be watching the gold price and domestic politicians for an indication of how the rand is likely to trade at the moment.
Andre Cilliers, currency strategist at TreasuryONE, noted that the dollar was steady after the Fed’s news, although “risk sentiment is a bit more positive”.
The local currency has been benefiting from a weaker dollar caused by US President Donald Trump’s vacillatory position on trade tariffs, with America set to start talks over these import duties with several countries, including Canada, China, and the UK this week.
Cilliers added that the current trading range of R18.15/R18.35 is likely to remain intact as traders await the outcome of US trade talks as Trump's 90-day pause on tariffs remains in effect.
IOL