Snapshot: Rand retreats against dollar on back of risk adverse investors

Rands and Dollar notes. Picture: File

Rands and Dollar notes. Picture: File

Published May 23, 2024


THE rand on Thursday was weaker against the dollar after investors shied away from risk after the Federal Open Market Committee (FOMC) raised concerns on the stickiness of inflation.

This as the rand had previously strengthening over this month.

By 12.40am the local currency was 0.51% weaker to the greenback at R18.3632.

Annabel Bishop, the chief economist at Investec, said, “The FOMC members’ concerns over inflation has knocked back the growing risk-taking in the markets, which had seen the rand gain over the course of the month of May from R18.84/$ to R18.03/$, and from above R19.00/$ in April...

“The rand returned today to exchange rates prevailing in early May, at R18.43/$, on last night’s release of the FOMC minutes, weakening in disappointment and retracing only slightly to R18.36/$ today so far.”

Bianca Botes, a director at Citadel Global, said, “Yesterday the rand started off on the front foot but ran out of steam before reaching the key R18.00/$ level. It traded weaker for most of the day.”

Markets were eagerly awaiting the US Federal Reserve minutes, which came out after hours. Concerns of stubborn US inflation dampened any hopes of lower interest rates in the near future. The Fed, again, expressed its disappointment with the slow rate of disinflation and vowed to keep rates higher for longer to get inflation closer to its 2% target.

Local inflation for April was surprisingly lower and came out at 5.2% (down from 5.3% previously), while UK inflation also showed further decline.

On the data front, today sees the release of US jobs numbers and housing data.

With less than a week to go before local elections, the rand starts the day at R18.30 to the dollar, R19.80 to the euro and R23.30 to the pound.

The JSE index was relatively stable at around 794 500 points as investors worldwide digested the hawkish FOMC minutes. The report from the Federal Reserve’s latest meeting revealed growing concerns among policymakers about persistent inflation, Trading Economics said. Some policymakers also indicated a willingness to raise rates further to curb inflation.

Meanwhile, market sentiment was tempered by strong sales forecast and upbeat earnings and revenue from Nvidia. Among single stocks, Bytes led the gains, up 4%, after posting solid results due to demand for its IT services. It was followed by Montauk Renewables, Quilter and Richemont. On the opposite side, Tsogo Sun shed over 5% after publishing dismal results for the year ended March 31, 2024.


Meanwhile, Trading Economics said gold prices dropped to around $2 360 (R43 367) per ounce, extending their decline, after investors pulled back their expectations of rate cuts amid hawkish tones from the Federal Reserve.


WTI crude futures fell toward $77 per barrel on Thursday, sliding for the fourth straight session as the latest Federal Reserve minutes indicated members’ willingness to tighten policy further if inflation surges, potentially hurting energy demand in the world’s top oil consumer.