Rand keeps below R14/$ as investors bet on US Fed rate cut

04 July 2019 - 16:06 By Odwa Mjo
Picture: REUTERS
Picture: REUTERS

The rand firmed through R14/$ on Thursday as talk of impending loose monetary policy in the world’s major central banks boosted emerging-market currencies.

The rand reached its best level since mid-April in intraday trade and was the third-best performing currency among emerging-market peers as markets continue to bet on the likelihood that the US Federal Reserve will cut interest rates soon.

Investors are closely watching the US nonfarm payroll figures to be released on Friday, which analysts say may give an indication about when the Fed may cut rates.

Emerging markets usually benefit from lower interest rates in developed markets as investors are prepared to take on more risk in search of better returns.

London-based managing analyst at Informa Global Markets, Christoper Shiells, said the US would be likely to cut rates should economic data support the need for looser monetary policy — a move that would benefit emerging markets.

In June, the European Central Bank (ECB) said it may consider loosening monetary policy through quantitative easing to spur economic growth, should inflation remain low.

“The conditions are broadly bullish for emerging-market currencies. There is obviously risk that if the US-China trade dispute does not get resolved, it will weigh negatively on global growth,” Shiells said.

At 2.30pm the rand had strengthened 0.44% to R13.9933/$, 0.36% to R15.7943/€ and 0.35% to R17.6104/£. The euro was flat at $1.1287.

Gold had fallen 0.34% to $1,413.50/oz and platinum 0.24% to $837.30. Brent crude was down 0.56% to $63.52 a barrel.