The rand was a lot stronger on Thursday morning‚ taking direction from the overseas markets‚ which were preoccupied with the appointment of a new US Federal Reserve chief.
Fed governor Jerome Powell has emerged as a favourite to succeed Janet Yellen‚ whose term will expire in February.
Powell is widely perceived as pursuing the gradualist approach in raising interest rates‚ a development that is seen as positive for higher-yielding emerging-market currencies such as the rand.
Standard Bank trader Warrick Butler said in an e-mail note that emerging markets “have breathed a collective sigh of relief overnight”.
As a result‚ the dollar was under pressure against the basket of currencies‚ allowing the rand to rally through R14/$ in a move that will help alleviate inflation worries.
The rand has had a rough ride since last week’s medium-term budget policy statement‚ which analysts and economists said had increased the chance of a sovereign credit rating downgrade.
“The downgrade story is still such an unknown quantity in terms of potential outflows‚ so‚ although an element of the effect may be in the price‚ the actual event may provide a very different outcome. The irony is that it could swing sentiment either way‚” said Ashley Dickinson‚ head of fixed income dealing at Sasfin Wealth.
Moody’s and S&P Global Ratings are scheduled to announce the results of the reviews later in the month. But it is not clear if they will pull the trigger or will await the outcome of the ANC’s elective conference in December.
The ANC conference is viewed as a binary event in some quarters‚ meaning that its outcome will either drag the local economy into a deeper crisis or result in economic reforms‚ which could restore business and consumer confidence.
Deputy President Cyril Ramaphosa and ANC MP Nkosazana-Dlamini Zuma are the frontrunners to succeed President Jacob Zuma as party leader.
At 9.30am‚ the rand was R13.9341 to the dollar from R14.0640‚ at R16.2467 to the euro from R16.3390 and at R18.4970 to the pound from R18.6257.
The euro was at $1.1659 from $1.1618.
-BusinessLive