Rand headed for worst weekly drop in a month

 

The rand was relatively flat in mid-morning trade on Friday‚ but still headed for its worst weekly drop against the dollar in about a month‚ dealing a potential blow to hopes of relief in fuel prices.

SA is a net importer of the oil‚ the price of which is determined by global factors. Brent crude was relatively stable at $73 a barrel in mid-morning trade‚ after falling 6.5% in July‚ in its biggest monthly drop since February.

In a sharp about-turn‚ the value of the rand has dropped just more than 2% against the greenback so far this week‚ once again putting on display its vulnerability to shifts in global sentiment.

The rand laboured under a strong dollar‚ which drew support from expectations of higher interest rates in the US. Earlier in the week‚ the US Federal Reserve said the US economy was in good shape‚ implying that it would continue with its interest rate-hiking cycle.

US nonfarm payrolls‚ due out in the afternoon‚ could provide further signs of economic momentum‚ which could boost the dollar at the expense of the rand and other currencies.

In particular‚ markets will be focusing on wage growth for signals of inflationary pressures‚ which could then feed into the higher rates narrative.

The rand was also the victim of global trade jitters‚ which curbed appetite for emerging-market assets. The controversial land reform debate also weighed on sentiment earlier in the week.

Local bonds have also come under some pressure this week‚ in line with a weaker rand‚ which has the potential to fuel inflation‚ thus forcing the South African Reserve Bank to increase interest rates.

At 10.53am‚ the rand was at R13.4626 to the dollar‚ from R13.4605 at the US close. It was at R15.5817 to the euro from R15.5954‚ and at R17.4829 to the pound from R17.5146. — Andries Mahlangu – BusinessLIVE

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