The rand dipped below R14.00 against the dollar in trade on Monday, amid rising expectations that the US Federal Reserve may cut interest rates.
With the rand now finally below the R14.00 mark, a renewed optimism fills the local currency market, said Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions.
“The recovery in the local unit has been driven mostly by a dovish Fed that stressed the importance of patience and flexibility in monetary policy, to the extent that many now even foresee a rate cut in the US.
“While poor performance from China, as well as the trade war, still pose a significant threat to emerging markets, for now the rand is basking in the afterglow of a subdued dollar,” Botes said.
Federal Reserve chairman Jerome Powell said on Friday: “As always, there is no preset path for policy. And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.”
On the data front in South Africa, manufacturing PMI for December will be released on Monday. The gauge has been below the 50 level since March, suggesting the economy is struggling to gain momentum after a first-half recession. Business confidence and manufacturing-production data comes Thursday, Bloomberg reported.
