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Johannesburg. — THE rand firmed by about 5c against the dollar at midday yesterday as emerging-market concerns abated and inflation data for April came in slightly higher than expected.
The market is waiting for the Reserve Bank’s interest rate decision on Thursday, with the consensus an unchanged outcome, with a slight possibility of a hike, ranging from 0,25 basis points to 0,5 basis points.
The rand weakened on Tuesday as news, including reports that Thailand had declared martial law, caused sentiment towards emerging markets to turn negative. However, much of these concerns had dissipated yesterday.
In the morning the rand was at R10,3892 to the dollar from Tuesday’s close of R10,4339.
The rand was at R14,2530 to the euro from its previous close of R14,2957 and at R17,5444 to the pound from Tuesday’s close of R17,5669.
The euro was at $1,3710 from its previous close of $1,3699.
The consumer price index (CPI) increased by 6,1 percent year on year for April, slightly higher than the consensus of 6 percent, but somewhat better than predictions of an increase of 6,2 percent, or even higher.
Nedbank Capital strategic research head Mohammed Nalla said the rand was stronger in response to the inflation data.
“As the number was somewhat weaker than expected, positions have been taken on the possibility of a hike tomorrow, thereby benefiting the rand.”
The rand is expected to strengthen in the event of a hike and possibly weaken if rates remain unchanged.
“Our view remains that it’s unlikely rates will be hiked against the background of the sluggish economy.”
Mr Nalla said the rand had been consolidating at its current levels for some time. “It would be prudent not to hike now as the rand is doing much of the Reserve Bank’s work for it,” Mr Nalla said. – BusinessDay.
Online Reporter