Rand strengthens as focus remains on US monetary policy
The rand was firmer against major global currencies on Monday afternoon as investors await some direction from the US Federal Reserve amid expectations that the US may cut interest rates.
Expectations of a rate cut were slightly dampened on Friday after US nonfarm payrolls showed that 224,000 jobs were added to the country’s labour market in June — 64,000 more than market expectations. The data is closely watched by markets as it is considered an important indication of the state of the US economy.
“Signs of the US economy stabilising will most likely complicate the Fed’s decision to cut interest rates. Should speculation of a US interest-rate cut diminish further on improving fundamentals in the US, dollar bulls could make an uninvited return — ultimately punishing the rand and other emerging-market currencies,” FXTM research analyst Lukman Otunuga said in a note.
Fed chair Jerome Powell is expected to testify before Congress on Wednesday to provide an outlook on the country’s monetary policy.
At 2.55pm, the rand had strengthened 0.37% to R14.1359/$, 0.41% to R15.8682/€, 0.39% to R17.7103/£. The euro was flat at $1.1226.
Gold had gained 0.3% to $1,403.76/oz and platinum 0.21% to $808.69. Brent crude was 0.25% lower at $64.26 a barrel.
The benchmark R186 government bond was stronger, with its yield falling 4.5 basis points to 8.115%. Bond prices move inversely to bond yields.