THE rand yesterday recovered some lost ground following the announcement by the Federal Open Market Committee (FOMC) that interest rates will not be on the cards anytime soon.
The Fed on Wednesday night said the US economy still had to reach maximum employment to consider higher interest rates.
It also reiterated its fairly calm take on inflation, once again underscoring its view that high rates of inflation were transitory.
The central bank also argued that price pressures will ease and pave the way for stronger employment and economic growth in the near months.
However, the Fed said it would soon begin the widely expected taper to their asset-buying programme, reducing purchases by $15 billion (R228bn) a month.
The dollar retreated in the wake of the FOMC announcement, commodity prices fell, and emerging market currencies strengthened.
This dovish tone by the Fed saw the rand gaining some ground against the US dollar, trading some 0.39 percent higher to R15.22/$ after closing at a high of R15.46/$ the previous night.
Market analysts said the rand needs to break below the R15.20/R15.25 area to open further strength back to R15.00, but traders will be tracking the movements in the dollar for now.
Investec chief economist Annabel Bishop said the markets were likely to continue digesting the FOMC speech this week and into next.
She said there was unlikely to be much of a dip in rand value based on projected gross borrowings to be revealed in the medium-term budget next week.
“Last night’s Fed meeting saw some rand strength as markets perceive the Fed comments as indicating that the FOMC was in no hurry to lift its interest rates, allowing US, and domestic bond yields to lower somewhat,” Bishop said. -
Siphelele.dludla@inl.co.za
BUSINESS REPORT ONLINE