The rand was on a shaky ground on Wednesday morning‚ hobbled in part by a renewed sell-off on global markets.
The local currency was trading at R11.71/$‚ pulling further away from R11.60‚ which marked its best level in about a month.
The stronger rand helps keep inflation in check‚ but hurts exporters.
The Reserve Bank will steal the limelight when its monetary policy committee (MPC) ends its three-day policy meeting on Wednesday afternoon.
“Will the MPC cut or not? No matter how much we speculate and [how many] scenarios we run‚ it all boils down to this simple question‚” TreasuryOne dealer Andre Botha said in e-mailed note.
He predicted that the committee would cut the repurchase rate‚ based on inflation‚ which was under control‚ as well as the improving political and economic outlook.
The rates decision comes just days after Moody’s Investors Service granted South Africa a stay of execution‚ keeping its debt rating at investment grade.
“Now that we expect a cut to happen later on today‚ what will the effect be on the rand? In theory‚ whenever there is a rate cut the rand should weaken‚ as investors will lose out on interest and the rand will lose some appeal in the carry trade market‚” Botha said.
“That is in theory‚ we all know that theory rarely complements reality and there are a fair few among us that believe the rand will strengthen after the rate cut.”
At 8:31am‚ the rand was at R11.7095 to the dollar from R11.6766‚ R14.5050 to the euro from R14.4830 and at R16.5544 to the pound from R16.5336
The euro was at $1.2386 from $1.2402.
by Andries Mahlangu – BusinessLIVE