South Africa's rand retreats as investors await rates decision

The rand was 0.55pc weaker at 18.0250 per US dollar after hitting 17.8920, its firmest since April 9, in the previo
21 May, 2020
  • The rand was 0.55pc weaker at 18.0250 per US dollar after hitting 17.8920, its firmest since April 9, in the previous session in a broad emerging market advance.
  • The South African Reserve Bank's (SARB) three-day monetary policy meeting concludes with a press conference to announce its decision on lending rates.

At 0630 GMT, the rand was 0.55pc weaker at 18.0250 per US dollar after hitting 17.8920, its firmest since April 9, in the previous session in a broad emerging market advance.

Optimism about a coronavirus vaccine and an easing of lockdown restrictions around the world has spurred demand for riskier assets - such as emerging market currencies - this week, while a recovery in commodity prices has also helped them.

But gains have been restrained by a reappearance of tensions between the United States and China, the world's two top economies, with US President Donald Trump's attacks on Beijing's handling of the coronavirus outbreak spooking already nervous investors.

Locally, the South African Reserve Bank's (SARB) three-day monetary policy meeting concludes with a press conference to announce its decision on lending rates.

The bank has already delivered 225 basis points (bps) worth of rates cuts to support the economy and is expected to lower them again by at least another 50 bps, although market-watchers are not ruling out a 100 bps drop.

"I think the boss (Governor Lesetja Kganyago) will err on the side of caution. If this is indeed the case, then I expect it to be rand and bonds supportive purely due to the idea that a 100 bps was also considered to be a possibility by the market," said chief trader at Standard Bank Warrick Butler in a note.

Bonds were steady, with the yield on the government issue due in 2030 down 0.5 bps to 8.975pc.

Read Comments