The rand firmed for the fourth consecutive day on Monday, as investors looked ahead to the Federal Reserve and SA Reserve Bank monetary policy committee meetings this week.
The local currency touched an intraday best of R17.6217/$ “in line with a softer dollar and generally stronger emerging-market currencies”, said TreasuryOne currency strategist Andre Cilliers.
Cilliers said a break below the R17.65 level could result in the local currency firming further, but cautioned that the currency had struggled to get through this level at previous attempts.
At 5.48pm, the rand had firmed 0.62% to R17.6364/$ and 0.21% to R19.6139/€, while it was little changed at R23.2725/£. The euro was 0.42% firmer at $1.1119.
Investec chief economist Annabel Bishop had a more optimistic outlook for the local currency. She said the rand is expected to move towards R17/$ next year, and breach the R17/$ resistance level by 2026 at least, if not sooner.
She said this is due to the expectation that the US will have a quicker and deeper interest rate cut cycle than SA, bolstering the rand.
“Improved economic growth environment in SA has also positively impacted investor sentiment. With no load-shedding in Q2 24, Q3 24 and Q4 24, we expect to see the same improved growth, bolstering the domestic growth outlook,” said Bishop.
The federal open market committee (FOMC) will conclude its two-day meeting on Wednesday, where it is expected to deliver the first interest rate cut in more than four years.
According to the CME FedWatch tool, about 56% of traders expect a 25 basis points (bps) cut at the meeting, while 44% expect a larger 50 bps cut.
Meanwhile, the SA Reserve Bank’s monetary policy committee (MPC) will deliver its interest rate decision on Thursday.
The Bank is widely expected to cut interest rates by 25 bps to 8%, with a similar cut expected in November.
The repo rate was last adjusted in May 2023 when the MPC raised it by 50 bps to 8.25%.
“It’s a busy week ahead, and one that will almost certainly see turbulence in the market,” said Citadel Global director Bianca Botes.
“Both the Fed and the [Reserve Bank] will be watched closely as they deliver their interest rate decisions. Investors will take a particular interest in the size of the cut by the Fed and any forward guidance central bank officials might offer,” said Botes.
The JSE all share was little changed at 82,007 points — with major indices mixed, while the top 40 lost 0.11%.
At 5.55pm, the Dow Jones industrial average was 0.34% firmer at 41,535 points, while markets in Europe were mixed.
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