Rand dips from three-week high

Picture: Siphiwe Sibeko

Picture: Siphiwe Sibeko

Published Sep 21, 2015

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Johannesburg - South Africa's rand retreated on Monday from its firmest levels in three weeks following the decision to keep US interest rates steady, as the market set its sights on the likelihood of a Federal Reserve rate hike this year.

The rand snapped Friday's gains as bulls ran out of steam after a top Fed policymaker said a rate hike this year is still likely. A sell-off of Asian equities also saw the rand beginning the week on the back foot.

Government bonds mirrored the rand, with the paper due in 2026 adding 3.5 basis points to 8.370 percent.

Stocks opened 328 points lower, with South Africa's blue-chip Top-40 index down 0.72 percent by 0702 GMT.

The rand was 0.27 percent softer at 13.3515 to the dollar compared with Friday's New York close of 13.3150.

“Last week's ZAR short covering is overdone, given that the lingering threat of Fed policy rate normalisation and persistently sluggish demand indicators out of China have not disappeared,” said Peter Worthington, an economist at Barclays.

Worthington added that “the balance of risks favours a move back up to the 13.50/USD area by month-end”.

Dollar strength also affected the rand as investors adjusted their positions after the Federal Reserve last week delayed a long-anticipated hike in US interest rates.

On the local front, the Monetary Policy Committee (MPC) will announce its decision on rates on Wednesday.

The MPC lifted interest rates by 25 basis points to 6.00 percent in a borderline call in August.

REUTERS

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