The rand stabilised at relatively stronger levels on Thursday morning, piggybacking on the favourable global market mood.
Equities convincingly pushed higher in early trade after days of dithering, with participants opting to shove geopolitics to the background, at least for the moment.
Similarly, the rand appeared to be finding some traction after hovering at about R12/$ for days in an apparent consolidation.
TreasuryOne currency dealer Andre Botha said in an e-mailed note to clients that better-than-expected inflation figures on Wednesday “only added credence to the fact that the rand’s strength is starting to have a definite impact on the South African economy”.
“Does this mean that we will have a spate of interest rate cuts? Before we saddle up our horses and proclaim it far and wide about possible interest-rate cuts, the governor of the Reserve Bank spoke in Washington yesterday and he reiterated the cautious stance that the MPC [monetary policy committee] will still employ.” Botha said.
Lesetja Kganyago highlighted the normalisation of developed economies’ central bank policies as possible hurdles for emerging-market currencies, in future.
“This probably means that we won’t see a spate of interest-rate cuts in the subsequent MPC meetings.”
The US and UK feature among the developed economies that are expected to further raise interest rates in 2018. Still, the policy tightening in these countries was likely to be shallower given the relatively low inflation pressures.
So far, the rand has been able to handle the current tightening cycle in developed economies with ease, shielded in part by improving domestic economic outlook.
Foreigners have been aggressive net buyers of local shares since December, helping the rand in the process.
At 10.02am, the rand was at R11.9319 to the dollar from R11.9306, R14.7826 to the euro from R14.7657 and at R16.9317 to the pound from R16.9485.