The rand hovered near a three-week high to the dollar on Monday morning, leveraging off a supportive global backdrop.
The dollar was still shaky after climbing down from a four-month peak against the basket of currencies late last week, coinciding with underwhelming US inflation reading.
The US data left questions hanging as to whether US Federal Reserve would be as aggressive in its rate hiking cycle as some had previously suggested.
Equity markets were roundly positive, giving impetus to the rand that halted its sixth consecutive week of losses against the dollar last week.
The relatively buoyant global market sentiment came as geopolitical tension eased, at least on the Korean Peninsula.
North Korea agreed at the weekend to dismantle its nuclear bomb test site, as one of its attempts to normalise relations with the international community, particularly the US, which has been critical of its nuclear weapons ambitions.
The rand has recently reclaimed its status as one of the most volatile currencies, swinging from R11.51/$ in late February to lows of R12.73/$ on May2 before coming back to R11.20 on Monday morning.
Whin Thin, global head of emerging market currency strategy at Brown Brothers Harriman, said the rand’s behaviour would influence the South African Reserve Bank, which meets next week to decide on interest rates.
The rand is a key variable in the outlook for inflation, which economists expect to have picked up from a seven-year low of 3.8% in March.
The higher inflation projections come against a backdrop of higher oil prices and increases in value added tax (VAT) and other indirect taxes.
Markets are keeping a close tab on the current public-sector wage negotiations, which could also affect inflation. The public-sector unions are reportedly gunning for above-inflation wage increases.
At 9.18am, the rand was at R12.2124 to the dollar from R12.2617, R14.6153 to the euro from R14.6442 and at R16.5799 to the pound from R16.6123.
The euro was at $1.1967, from $1.1942. – BusinessLive