Rand a tad firmer, awaits ECB announcement
THE rand was a trading a tad stronger at noon on Tuesday as markets awaited the European Central Bank’s (ECB) policy announcement on Thursday.
Expectations are that ECB president Mario Draghi will cut interest rates this week and that details of a bond purchase programme of troubled eurozone countries might be on the cards.
At 12.18pm, the rand was bid at R8.3674 to the dollar from R8.3828 at Monday’s close. It was bid at R10.54 to the euro from its previous close of R10.554 and at R13.2791 against sterling from R13.3106 before.
The euro was bid at $1.2603 from $1.2588 at Monday’s close.
"The rand seems to be mirroring the dollar, with the euro trading firmer on the back of expected monetary easing announcements from the ECB on Thursday and from the US Federal Reserve next week. This would be temporarily beneficial for riskier currencies like the rand," said Bruce Donald, head of rand strategy at Standard Bank.
"The increase in year-on-year new vehicle sales released today was off sharply in August versus the July reading, adding to the list of domestic economic indicators fuelling hopes for another rate cut from the Reserve Bank," he said.
"However, the probability that the bank will cut interest rates at their next meeting this month is fairly low, to our minds. The chances of a reduction do escalate into the November and January meetings, but not to or past 50%, in our opinion. Shifting domestic interest rate expectations are likely to continue adding volatility to the local currency market in the coming months," he added.
New vehicle sales increased 9.4% year on year in August, way less than the 18.3% year on year increase in July.