Rand at five-month high on dovish Fed

11 July 2019 - 16:13 By Odwa Mjo
Picture: REUTERS
Picture: REUTERS

The rand’s rally continued on Thursday afternoon after US Federal Reserve chair Jerome Powell’s dovish testimony saw the it reach its best level in five months in intra-day trade.
The first day of Powell’s two-day testimony before US law makers served as an indication to investors that an interest-rate cut is on the cards at the Fed’s next meeting later this month. Powell said the US-China trade war and concern about global growth have weighed on the US’s economic outlook. Expectations that the Fed will ease monetary policy pushed the rand to below R13.90/$.

“As can be seen from equities and risky assets, the dovish bias of the committee still holds,” currency trader at Standard Bank Warrick Butler said in a note. “The chances of a 25-basis-point (bps) cut at the end of the month are almost at 100% now with the market re-assessing their earlier predictions of another 25bps cut before the end of the year, albeit with slightly less enthusiasm now.”

At 2.40pm, the rand had strengthened 0.69% to R13.8879/$, 0.47% to R15.66/€ and 0.21% to R17.4549/£. The euro had gained 0.23% to $1,1276.

The benchmark government 10-year bond was stronger, with its yield falling 9.5 basis points to 8.01%. Bonds yields move inversely to bond prices.

Gold had fallen 0.22% to $1,415.71/oz and platinum 0.12% to $825.85, while Brent crude was 0.59% higher at $67.04 a barrel.

Figures released by Statistics SA on Thursday showed that the manufacturing sector grew by 1% year-on-year in May, while mining production contracted 1.5%. The Trading Economics consensus was for mining to have contracted 2.5% and manufacturing to have expanded 1.4%.