Rand builds on gains following US Fed minutes
THE rand initially built on its Wednesday evening gains against the dollar in early trade on Thursday, after dovish Federal Open Market Committee (FOMC) meeting minutes were released at 8pm on Wednesday.
"We were trading above R8.30 per dollar when we left yesterday afternoon. The FOMC minutes gave a boost to the commodity currency complex, but there has been a pullback this morning on the back of weak August Chinese data," a local trader said.
After earlier reaching R8.2000, at 8.30am local time the rand was trading at R8.2521 to the dollar, from R8.3036 at 3.53pm on Wednesday, Wednesday’s close of R8.2261 and Tuesday’s close of R8.2516.
It was trading at R10.33455 to the euro from its previous close of R10.3048 and at R13.1041 against sterling from R13.0524 before.
The euro was bid at US$1.2531 from $1.2533.
Absa Capital said in its morning report that Wednesday night’s dovish FOMC minutes, which have kept the door open for another round of quantitative easing from the Fed, ensured the rand was taking advantage of a weak dollar environment.
"The greenback has lost ground across the board in the wake of late night’s FOMC minutes, especially given that the report came in the wake of some disappointing US housing data," Absa Capital said.
"This morning’s uninspiring Chinese manufacturing data implies the People’s Bank of China might also need to provide more monetary accommodation.
"Risky assets continue to rally whenever the chances of more stimulus from the Fed, the European Central Bank, the Bank of England or the People’s Bank of China seems likely, so we argue that the bias remains in favour of rand bulls this morning, even though the local unit strengthened sharply overnight.
"We are also more constructive about the rand prospects over the medium term," the bank said.
Dow Jones Newswires reported that China’s manufacturing activity fell to a nine-month low in August. The purchasing managers index (PMI), which gauges nationwide manufacturing activity, eased to 47.8 in August from 49.3 in July.
New export business declined at its sharpest rate since March 2009, HSBC said, without giving a figure.