The rand recovered slightly on Tuesday afternoon‚ but a weakening trend was in force‚ underscoring the fragile market sentiment as local politics continued to dominate.
The local currency slipped to session lows of R13.63/$‚ its weakest since early May — a development that has an inflationary potential.
The Reserve Bank’s monetary policy committee‚ which meets next week to decide on interest rates‚ has forecast inflation to average 5.7% throughout 2017. But Old Mutual Investment Group economist Tinyiko Ngwenya expects inflation to average 5.6% in 2017 and for the committee to lower the repurchase rate at least by a cumulative 50 basis points before the end of the year.
A little more than three weeks ago‚ R12.75 bought one dollar‚ before the controversy surrounding the Reserve Bank’s constitutional mandate rattled the currency.
Public Protector Busisiwe Mkhwebane set off the controversy when she ordered Parliament to start a process to review the Bank’s mandate‚ from one that protects the value of the rand to one with a socioeconomic focus.
The souring investor sentiment towards emerging-market debt has also weighed on the rand.
At 4pm‚ the rand was at R13.5618 to the dollar from Monday’s R13.486‚ at R15.4734 to the euro from R15.3712 and at R17.4453 to the pound from R17.3678.
The euro was at $1.1410 from $1.1399.
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