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Rand a touch firmer as market bets on low US rates

Johannesburg - The rand held firm against the dollar on Wednesday, in a market expecting the Federal Reserve to keep US interest rates low for longer, boosting the appeal of high-yielding emerging market assets.

The rand was at R13.88 to the dollar by 09:20, while the yield on the 2026 benchmark government bond added half a basis point to 8.6%.

Consumer inflation data at 10:00 is likely to cement the view that the South African Reserve Bank will keep the benchmark repo rate unchanged at 7% on Thursday.

The blue chip futures index edged up 0.15%, signalling slightly firm start for stock market at 09:00.

"Expect further volatility around the Fed press conference tonight," said RMB analyst John Cairns on Wednesday."The probability of a rate hike is only 12%, but the market will watch for changes in the interest rate forecasts and tone of the statement." 

He said the market expects a local inflation print of 6% at 10:00. "Our more optimistic figure of 5.8% would help our long standing view that rates could be cut next year," he said.

"Moody’s, yesterday, put the chance of a rating downgrade for SA at about a third," Cairns explained. "A trigger would be if growth does not accelerate to 2% in the next few years.

"The agency expressed confidence that Finance Minister Gordhan would stay in job. It will announce its next rating decision on 25 November. The more important date remains 2 December when S&P announces its decision."

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Rand - Dollar
18.93
-0.0%
Rand - Pound
23.90
+0.0%
Rand - Euro
20.40
+0.1%
Rand - Aus dollar
12.32
+0.1%
Rand - Yen
0.13
+0.0%
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