Rand weaker as central bank meetings spook traders

The rand was weaker against major currencies on Monday morning‚ backtracking on gains made going into the weekend as investors showed signs of anxiety ahead of central bank action in Japan‚ the US and SA.

At 8.30am‚ the rand was at R15.3003 to the dollar from R15.2298 at Friday’s close. It was at R17.0793 against the euro from R16.9689 and R21.9906 against the pound from R21.8938.

Bureau for Economic Research economist Hugo Pienaar said there was scope for the South African Reserve Bank to leave rates unchanged when it announced its decision on Thursday.

In addition to the stronger rand‚ Mr Pienaar noted that many expected the US Federal Reserve to embark on a less aggressive interest rates course this year than had previously been thought‚ while the European Central Bank (ECB) boosted its monetary policy stimulus last week.

"All of this reduces the pressure on the Bank‚ so we expect it to be as unaggressive as possible‚" he said.

The financial markets have priced in a cumulative 80 basis points in rate hikes by year-end.

The US central bank is expected to leave rates on hold on Wednesday. But analysts and investors say easing market turmoil‚ a strong labour market and some signs of an uptick in inflation in the world’s largest economy would give the Fed wiggle room in tightening monetary policy in the months ahead‚ Dow Jones Newswires said.

In other currency markets‚ the dollar was largely flat against the yen and the euro was range-bound during the Asian session on Monday.

Investors were reluctant to make major moves before the Bank of Japan wraps up its two-day policy meeting on Tuesday‚ followed by the Fed’s policy decision on Wednesday‚ the newswire said.

The US currency was at ¥113.78 at about 4.50am GMT‚ almost unchanged from ¥113.81 late on Friday in New York.

The dollar was slightly lower against the euro‚ which rose to $1.1163 from $1.1145 late on Friday.

The WSJ Dollar index‚ a measure of the dollar against a basket of major currencies‚ was down 0.07% at 87.92. - TMG Digital/BDlive