Rand recovers after spiking to R13.10/$ on US GDP data

Cape Town - The rand spiked to R13.10 to the US dollar on Wednesday afternoon, giving up all the gains of the previous session as the dollar rebounded.

By 15:53 the unit recovered some of the losses to trade 0.49% weaker at R13.04 to the greenback. It spike to R13.10 shortly after the release of the second quarter GDP numbers for the US after starting the session below the psychological R13/$-level.

TreasuryOne ascribed the move to the US GDP data, which was revised upward to 3%, the fastest pace in two years on stronger household spending and a bigger gain in business investment.

"US 2nd quarter GDP number prints better than the initial 2.6%, with the revised number coming in at 3%," TreasuryOne said in a snapnote.

"The dollar has dipped below the 1.1900 level against the euro and trading close to the R13.10 level against the rand."

In an update on Wednesday morning, Andre Botha dealer at TreasuryOne explained that beside the US GDP figures, budget data to be released may indicate whether the budget is being adhered to.

Bloomberg reports the dollar rose and Treasuries fell after the better-than-forecast data bolstered speculation the US economy may be strong enough to prompt a Federal Reserve move.

Investec chief economist Annabel Bishop’s analysis of the rand showed that it strengthened from R13.52/$ to as much as R12.52/$ mid-month, given the weakening of the US dollar. The rand also gained as geopolitical risks shifted with reports that North Korea launched a missile which passed over North Japan.

“The Rand has experienced a reduction in volatility on low global volatility in financial markets. We continue to forecast some further weakness in the domestic currency this year, particularly marked over the turn of the year as the elective conference ensues,” said Bishop. 

The Rand may depreciate close to R17/$ by the end of the year and close to R19/$ next year if the new president of the ANC is not favoured by the financial markets and the credit rating agencies, she explained.

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