Rand set to break four-week winning streak

The rand was on track to break a four-week winning streak against the dollar on Friday, having been buffeted this week by rising Middle East tension and signs of hawkishness from the US Federal Reserve.

On Friday afternoon, the rand had lost 1.57% against the dollar for the week so far. It has, however, still gained 2.63% against the greenback over the past 30 days, making it the fourth-best performing emerging-market currency tracked by Bloomberg.

Markets have had a mixed reaction to the US Fed policy statement on Wednesday, with the expectation of further rate cuts in 2019 being tempered amid rising borrowing costs in the US, which the world’s most influential central bank played down.

Short-term borrowing costs have risen in the US, a result of a coincidence of unrelated factors, such as treasury auction settlements, tax payments, and a broad-based sovereign bond sell-off a week earlier, said London Capital Group senior market analyst Ipek Ozkardeskaya in a note. This obliged primary dealers to buy a huge amount of assets from investors.

“As it appears, the Fed’s muted reaction to the tightened short-term liquidity trimmed the dovish expectations for the coming meetings,” Ozkardeskaya said.

At 1.50pm, the rand had weakened 0.38% to $14.8766/$ and 0.3% to R16.4066/€, while remaining flat at R18.573/£. The euro was 0.11% weaker at $1.1029.

The pound was finding some support after European Commission president Jean-Claude Juncker said on Thursday that he is confident a Brexit deal will get passed before the October 31 deadline.

The rand’s worst day was on Thursday, when the Reserve Bank kept interest rates on hold at 6.5%, although it struck a marginally dovish note.

While the rand has weakened 0.9%, other emerging-market currencies have also been under pressure, with the Turkish lira shedding 0.7% and the Brazilian real 1.4% against the dollar, said Rand Merchant Bank analyst Mpho Tsebe in a note, adding that focus on Friday shifted to US-China trade talks.

- BusinessLIVE