Rand recovers to two-week highs as dollar recoils

The rand was a lot stronger on Thursday morning, mirroring changing market perceptions towards the dollar, after the US Federal Reserve released minutes of its most recent policy meeting.

While most Fed officials expect another increase in interest rates by year-end, they expressed concern about the outlook for inflation, which has for some time been running below the 2% target.

As a result, the dollar sold off, giving high-yielding emerging-market currencies further breathing space.

The rand bought a single dollar at about R13.48 in early trade, which was significantly stronger than the R13.86 seen at the start of the week.

The stronger currency suggests a revival of the so-called carry trade, where money is borrowed in low interest-rate environments and invested in currencies that offer higher returns.

The stronger currency helps keep inflation in check, though it doesn’t bode well for exporters.

“Doubts have been put to rest: it is now clear that the dollar rally has abated and that a weakening trend has emerged — although how long this will last is still open to question,” Rand Merchant Bank currency strategist John Cairns said in a note.

At 9.32am, the rand was at R13.4758 to the dollar from R13.5217.

It was at R15.9888 to the euro from R16.0457 and at R17.8466 to the pound from R17.8913.

The euro was at $1.1864 from $1.1867. – BusinessLive

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