The rand has weakened substantially in the last week as it takes direction from the US and awaits the impact of the Federal Reserve’s (FED) September meeting this week.
TheSouth African rand was trading at around R17.06 against the dollar at 8.30am on Monday last week.
This incredible rally did not last long, and on Wednesday, the rand was trading looking volatile and had declined sharply to around R17.60 to the dollar at 8.30am.
The rand was trading at around R19.32 to the euro and around R23.05 to the pound.
This is the rand’s weakest level in three weeks and has lost almost 1.5% over the past week when compared to the dollar.
The impact of the US on the rand
Andre Cilliers, currency strategist at TreasuryONE told Reuters that the dollar and rand’s relationship is heavily influenced by the US Consumer Price Index data, the Fed’s monetary policy direction and the November Presidential election between Kamala Harris and Donald Trump.
“The dollar remains strong, supported by solid US jobs data, while the ZAR awaits further clarity on these factors,” he explained.
"Uncertainties in the US are keeping the rand under pressure. A stronger dollar would make the ZAR relatively weaker, and the Fed's messaging regarding interest rate cuts is a key factor here," Cilliers emphasised.
The FED’s meeting on Wednesday will delve into the bank’s reasoning and decision to cut US interest rates last month. This will provide clues on another possible interest rate this year. The rand will take cues from this meeting and also impact the South African Reserve Bank’s decision to cut interest rates in November.
Investors will also be focusing on the US’ inflation figures that are due to be released on Thursday. This will play a role in beefing up the dollar’s strength against global currencies and therefore the rand.
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