Rand continues decline

Johannesburg. – The rand continued its decline against the dollar yesterday morning as investors priced in a sooner than expected US rate hike. At 8.38am, the rand was trading at 12,1664 against the dollar from Monday’s close of 12,1073. The rand was last at these levels in August 2002. Against the euro the rand was at 13,1225 from a previous close of 13,1171 and was at 18,3347 against the British pound from a previous close of 18,2872.

“The rand has been on the back foot since the break above R12 against the dollar on Friday. But it is not alone in its decline, indicating that the sell-off in the dollar-rand exchange rate is largely due to dollar strength as opposed to rand weakness,” Standard Bank analysts said in a note.

The bank said sentiment around US growth remained positive.

“The fact that nominal bond yields are higher is (an) indication that inflation expectations are improving in the US. This would be in line with market expectations that the Federal Reserve is likely to raise rates in either July or September. We pencil in September,” said Standard Bank. -BDlive

The euro was at $1,0790 against the dollar from a close of $1,0835, a level last seen in 2003. Barclays Research said traders would be watching a number of developments this week, both local and international.

“Thursday’s domestic manufacturing and mining data could be rand and bond negative from an overall growth differentials perspective. Internationally, this week’s roll-out of European Central Bank quantitative easing measures as well as European Union industrial production and Chinese data could bring about only temporary relief for South African markets.

“However, if this week’s US retail sales data heighten US rate hike fears, then both the rand and bonds are likely to come under renewed selling pressure,” the research team said.-BDlive