The rand extended the previous session’s losses on Wednesday, with the JSE trimming losses, as investors focused on the minutes from the US Federal Reserve’s recent meeting.
The minutes from the federal open market committee (FOMC) September meeting that will be released at 8pm on Wednesday are set to reveal the reasoning behind the policymakers’ surprise 50 basis point (bps) interest rate cut.
The Fed’s decision to lower interest rates indicates a shift in monetary policy, aiming to stimulate economic growth. The minutes will provide valuable insights into the Fed’s thought process, helping investors understand the central bank’s stance on inflation, the labour market and economic expansion.
“The dollar firmed further during the day as markets braced for the FOMC minutes from September’s meeting, where the Fed cut 50 bps,” said TreasuryONE director and head of market risk Wichard Cilliers.
“The markets had priced in a further 75 bps cut by the end of the year after the September meeting, but robust labour and strong economic data since then have seen the anticipation scaled back.”
At 6.03pm, the rand had weakened 0.49% to R17.6422/$ — having touched the weakest level more than a month at R17.6745/$. It had weakened 0.26% to R19.3119/€ and 0.33% to R23.0636/£. The euro was 0.29% weaker at $1.0946.
In addition to key economic releases this week, investors will closely watch the consumer price index (CPI) report, due to be released on Thursday.
“Traders are cautious about whether US inflation data will prompt a hawkish or dovish response from the Fed, as this affects the direction of the dollar,” said Cilliers.
Investors are keeping a close eye on the developments in the Middle East. Elevated geopolitical risk in the region continued to cast a shadow on financial markets, sparking concern about a potential escalation, which may drive oil prices higher.
“The recent rise in oil prices has caused concerns for inflation, adding to market expectations that the US rate cut cycle will not be sharp, and so bolstering the dollar, and weakening the rand,” said Investec chief economist Annabel Bishop.
The JSE all share and the top 40 both lost 0.18%, with the former closing at 85,336 points. Industrial metals added 0.38% and precious metals 0.34%. Banks lost 1.33%, financials 0.93%, food producers 0.72% and retailers 0.11%.
In commodity markets, gold lost 0.25% to $2,615.22/oz and platinum 0.24% to $952.92/oz. Brent crude was 1.11% weaker at $76.57 a barrel.
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