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Rand firms slightly as market awaits interest-rate decision

The rand was slightly firmer at midday on Monday as it traded in a tight range ahead of the South African Reserve Bank’s monetary policy committee decision on interest rates.

The committee‚ which is widely expected to leave the repurchase rate unchanged on Thursday‚ is likely to take a cautious stance on possible rate decreases later in 2017‚ after last week’s renewed volatility in the currency.

With no real news to drive the rand‚ including flat gold and platinum prices‚ the local currency was trading in a narrow band of between R13.15/$ and R13.22/$. After crossing R13.20/$ in early-morning trade‚ further gains were capped on a marginally stronger dollar.

At 11.46am the rand was at R13.1989 to the dollar from R13.2289.

It was at R14.7570 against the euro from R14.8145 and at R17.1353 against the pound from R17.1972.

The euro was at $1.1182 from $1.1204.

Analysts cited the weaker rand as a key factor that the Reserve Bank would consider in the rate decision.

The Bank has indicated that the rate-hiking cycle is at an end‚ but lowering rates could be premature against the background of geopolitical tension‚ possible credit-rating downgrades and a US Federal Reserve rate-increasing profile.

“We believe the Reserve Bank was likely to maintain a marginally hawkish stance given the vulnerable rand and event risks on the horizon‚” Nedbank Corporate and Investment Banking analysts said.

The rand has been volatile since the last rate-setting committee meeting in March‚ swinging from highs of R12.31/$ to lows of R13.95/$‚ when Pravin Gordhan was fired as finance minister in a controversial Cabinet overhaul.

But relatively favourable sentiment towards emerging markets has helped cushion the local currency against the blows of local politics‚ which prompted S& P Global Ratings and Fitch to downgrade the country’s debt in April.

 

-TMG Digital

 

 

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