JOHANNESBURG - The rand lost momentum as the risk rally showed signs slowing, but remained near multi-week highs against the greenback according to NKC Research.
A favourable external backdrop shaped by vaccine optimism and a policy-led softening in the greenback shelter the local unit, while carry appeal remains alive and well as foreign investors seek to benefit from an expected compression in the risk premium in local currency bonds.
We believe that the Fed minutes from the November policy meeting underscored the FOMC’s very dovish forward guidance, supporting our call that rate lift-off does not take place until mid-2024.
While officials at the time of the meeting were content with the current composition, size and maturity duration of its QE purchases, we assess that worsening economic conditions will lead officials to extend the duration of QE Treasury asset purchases, and possibly ramp up the size.
The Fed could act before the next FOMC meeting slated for December 15-16, with the most opportune time being November 30, when the Fed announces its next round of monthly asset purchases.
We see it taking this action mainly as insurance against the mounting downside risks to the economy in the near-term and as a policy signal that reinforces the Fed’s dovish forward guidance.
At the close of local trade, the rand quoted 0.53 percent weaker at R15.26/$, after trading in the range of R15.15/$ - R15.34/$.
South African bourse
The JSE All Share (-0.03 percent) ended slightly lower heading into the weekend, dragged by losses in large tech and industrial stocks. In the overall emerging market sphere, the MSCI Emerging Market Index (1.11 percent) traded lower.
Brent crude oil
The Brent oil price was mixed on Friday but remained on track for a fourth consecutive weekly gain ahead of this week’s Opec+ meeting. At the close of local trade, benchmark Brent crude futures quoted 0.08 percent higher at $47.94pb. Crude prices traded steady during Asian trade this morning.
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