Johannesburg – The rand prolonged its rally on Friday afternoon‚ which had been sparked on Thursday by the European Central Bank's (ECB) government bond-buying plan announcement‚ and on Friday afternoon on the back of heightened expectations that the Fed would announce monetary easing in one form or another‚ at its Federal Open Market Committee (FOMC) meeting next week‚ which would buoy the rand.
The rand was also stronger on the back of a stronger euro‚ which had made good gains after ECB president Mario Draghi’s speech.
The US reported weaker-than-expected employment growth in August‚ with the economy adding 96 000 jobs last month‚ less than forecasts of a 125 000 increase. However‚ the unemployment rate fell to 8.1% in August from 8.3% in July‚ whilst economists had expected unemployment to remain at 8.3%.
At 16:16‚ the rand was bid at R8.1818 to the dollar from R8.2996 at Thursday’s close and R8.3919 at Wednesday’s close. It was bid at R10.4508 to the euro from its previous close of R10.4816 and at R13.0872 against sterling from R13.2199 before.
The euro was bid at $1.2769 from $1.2629 at Thursday’s close.
“The rand has been doing incredibly well for a couple of reasons. The Mario Draghi bond-buying announcement yesterday was in line with market expectations. He announced unlimited amounts of 3-year bond buying for an unlimited period‚ which would ease up liquidity in the markets‚” said Mark Kalkwarf‚ senior portfolio manager at the Iquad Group.
“Next week we are expecting the US to do similar in one form or another. Europe is not cash flush‚ but liquidity would be eased up through bond- buying.
“If the dump cash into the markets‚ banks will be cash flush. I am almost certain they are going to do it and the rand should strengthen‚” he added.
All eyes are now on the German courts decision regarding the European Stability Mechanism (ESM) bailout fund on Wednesday‚ followed by the FOMC meeting a day later.