Rand remains firmer as Reserve Bank keeps repo rate unchanged
The rand was little changed after the SA Reserve Bank opted to keep the interest rate unchanged on Thursday. The central bank's monetary policy committee unanimously chose to keep the repo rate at 6.5%, a move that was largely priced in by the market.
The bank revised its inflation forecast for 2019 down to 4.2%, from 4.4%.
“In this persistently uncertain environment, future policy decisions will continue to be highly data-dependent, sensitive to the assessment of the balance of risks to the outlook, and will seek to look through temporary price shocks,” the Bank said.
At 4pm, the rand had firmed 0.25% to R14.65/$, after initially reaching R14.60/$ shortly after the Bank’s announcement. It was flat at R16.2063/€ while it had weakened 0.14% to R18.298/£.
The rand has recovered in the short-term, leading gains in emerging-market currencies over the past 30 days. The currency has been supported by an easing in global monetary policy and comments by Moody’s Investors Service that SA is still safe from a credit-rating downgrade.
The Reserve Bank did say, however, that the rand had depreciated 4.6% to the dollar since the last MPC meeting in July, and that it remained “slightly undervalued”.
Weak domestic growth and the ongoing US-China trade war will continue to put pressure on the rand, Sanlam Private Wealth portfolio manager Nick Kunze said. “We have been quite lucky as a commodity currency due to the improvement in precious metal prices. Even though we have been cushioned by this bounce in commodities and precious metals, we really do need faster economic growth.”
Gold was up 0.43% to $1,500/oz and platinum 1.13% to $937.26/oz. Brent crude added 1.48% to $64.58 a barrel.