Rand catches a break after Fed

Rand catches a break after Fed announcement

Last week, all eyes were on the looming US Federal Reserve Bank interest rate decision, with markets unsure of where the dollar was heading.

Rand catches a break after Fed

On Thursday, the Fed’s decision to keep the interest rate unchanged gave emerging markets room to breathe. However, the possibility that the Fed could still raise interest rates before the end of the year, along with the economic slowdown in China, means the current uncertainty surrounding the Rand and other emerging market currencies will likely continue.

After taking a hit on Monday last week the Rand had recovered slightly by Tuesday afternoon, testing the 13.40 barrier after the release of the Q2:15 current account deficit figures. The deficit decreased to -3.1% of GDP from -4.8% of GDP. This was better than Bloomberg’s expectations of -3.7%.

The Rand was firmer following the Federal Open Market Committee meeting with average rates on Friday of 13.3271 USD-ZAR, 20.7023 GBP-ZAR and 15.0956 EUR-ZAR.

What to look out for this week?

The South African Reserve Bank (SARB) Monetary Policy Committee is due to meet on Wednesday next week. Expectations are that the SARB will mirror the Fed and keep rates unchanged. In August they lifted interest rates by 25 bps to 6.00%. The Public Holiday (Heritage Day) on Thursday will no doubt have a slight impact on decisions to trade, with many using the day to create a long weekend

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