adminJohannesburg. – THE rand was steady in early morning trade on yesterday after weakening overnight against the dollar in response to the US Federal Reserve’s earlier rate hike statement.
The Federal open market committee (FOMC) reaffirmed its tapering stance by cutting the stimulus package by a further $10bn to $55bn a month. At the beginning of the year the asset-buying stimulus programme was $85bn a month.
This was expected by the market.
The Fed had conveyed relatively little concern about recent soft US economic data, Barclays Research said in a note. “What was somewhat surprising, was that it quickened the expected pace of its rate hike cycle.”
The Fed now expects rates to be at 1 percent by the end of 2015 and 2,25 percent by end of 2016.
The comments led to a stronger dollar and weaker emerging-market currencies, including the rand.
In the morning the rand was at 10,8574 to the dollar from Wednesday’s close of 10,8666.
Against the euro, the rand was at 15,0289 from its previous close of 15,0198, and was at 17,9671 to the pound from 17,9656 on Wednesday.
The euro was at $1,3839 to the dollar from a previous close of $1,3817 as the euro weakened from levels over $1,3950 earlier.
Nedbank Capital said in an early morning note that although the major part of the FOMC release was not new, the intimation from Fed chairwoman Janet Yellen that US rates could rise relatively soon after tapering ended, and the guidance on these levels, sent emerging markets scurrying for cover.
The quiet rand trading since the beginning of the week quickly turned around once the committee’s announcement was made.
The rand lost ground fast from about 10,73 to the dollar to 10,88, before recovering a little. “The move was fierce,” Nedbank said. – BusinessDay.
Online Reporter