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Rand in for a 'bumpy ride' - analyst

Jun 29 2018 10:52
Lameez Omarjee

The rand has taken the biggest hit among other emerging market currencies due to poor economic growth, wage talks at Eskom and unfavourable financing needs, according to an analyst.

The currency opened at R13.77 on Friday morning. By 10:00 it was trading 0.36% stronger at R13.72. It nearly broke through the R14/$ level on Thursday due to dollar strength, but held firm on the back of weaker-than-expected US GDP data, explained TreasuryONE’s senior currency dealer Andre Botha.

"The US GDP number for quarter one of 2018 was revised downward from 2.2% to 2%. We have seen the US dollar giving back some of its gains yesterday, and this has helped the rand in edging stronger."

However, RMB economist Isaah Mhlanga warned that the rand could be vulnerable to "crucial data" coming out on Friday, including domestic credit extension, trade balance and the monthly budget balance.

A positive trade balance could help the rand trade stronger, added Botha.

Globally the US will release its consumer price index data and core personal consumption expenditures (PCE). "US and eurozone inflation differentials will be in focus today," said Mhlanga.

"While the eurozone CPI estimate is expected at 2% from 1.9% in June, the market expects a slight moderation in core inflation to 1% from 1.1%.

"Any sign of lower-than-expected eurozone CPI or higher-than-expected US core PCE will put pressure on EUR/USD to lower," he explained.

Bianca Botes, corporate treasury manager at Peregrine Treasury Solution shared views that local data would not assist the rand’s strength.

"We look to the rand having a bumpy ride today, trading between R13.50 and R13.98," she said.

Analysts from NKC economics expect the rand to trade within a range of R13.55/$ to R13.80/$.

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rand  |  markets  |  currencies
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