Thanksgiving to give rand a breather

Cape Town – The rand opened weaker on Thursday at R14.19 to the dollar and is expected to soften further on the back of a stronger dollar. 

At the close of local trade on Wednesday, the local unit traded 1.3% weaker at R14.25/$ after staying in a range of R14.02/$ to R14.29/$, said NKC Economics. It expects the currency to trade between R14.05/$ and R14.35/$. 

The dollar powered to a fresh 13-year high on Wednesday as economic data supported expectations for a US interest rate hike and concerns that the multi-decade bull run in the bond market has reached its peak, said Wichard Cilliers, head of dealing and a director at TreasuryOne. 

The Republican victory in the recent US presidential elections as well as the promise of an economic stimulus of nearly $1trn has “rocked the complacent global bond market”, Cilliers said, as investors are of the view that this could finally kickstart inflation. 

The rand on Wednesday closely tracked the movements of US Treasuries, losing ground before clawing back some losses when they bounced back overnight. 

“Although the rand touched the R14/$ level on Wednesday, it never appeared like it had momentum to break the level,” Cilliers said. 

Isaah Mhlanga of RMB Global Markets research and sales expects Donald Trump's presidency to be “bad” for the rand – whether his policies boost US growth or lead the economy into a recession. 

At the US Federal Open Market Committee meeting most participants expressed the view that the Federal Reserve could raise interest rates relatively soon, said Mhlanga. 

US markets are closed on Thursday for Thanksgiving, which reduces global event risk for the rand. 

Adam Phillips of Umkhulu Consulting said although US durable goods numbers pushed the rand higher, the lack of liquidity brought it back to around R14.20/$. 

He expects Statistics South Africa's producer price index figures to be about 6.10%. Wednesday's release of purchasing managers' index data in the eurozone did very little to euro trading, Phillips said, as markets are currently fixated on US data.