The rand has not changed much on Wednesday as National Treasury and investors wait for the US Federal Reserve to make a decision on interest rates.
The rand was trading at around R18.78 to the dollar at the close of business on Tuesday and was trading at around R18.69 at 11.20am on Wednesday.
The dollar index was last up 0.2% against a basket of currencies, according to Reuters analysts.
It is expected that the US central bank will not change the interest rate.
It should be noted that the rand was trading at about R20.25 to the euro and around R23.71 to the pound at 11.30am on Wednesday.
“I fully expect that the Fed will hold rates steady. Wall Street and markets around the world will, of course, be looking for clues on shifts in the central bank’s policy stance in Chair Powell’s remarks after the meeting,” Nigel Green, the CEO of the deVere Group said.
Green said in a statement that most investors will remain cautious on the future of potential rate cuts and will want to see more evidence that the fight against inflation is happening in the US.
Fed chairperson, Jerome Powell will want to avoid cutting the US interest rate prematurely and face the threat of inflation rising again, Green said.
“He will almost certainly push back against those market expectations of five cuts this year. The Federal Reserve has spent almost two years hauling up interest rates to cool multi-decade high inflation, and it appears to be working with steadily cooling price increases”.
SA INTEREST RATES
Last week, the rand remained steady as the Reserve Bank kept interest rates unchanged for the foreseeable future and first half of the 2024 year.
South African Reserve Bank Governor, Lesetja Kganyago said the repo rate will remain at 8.25%, while the prime lending rate also stays at 11.75%.
“Achieving permanently lower inflation and interest rates requires inflation expectations to be closely anchored to the mid-point of the target band,” Kganyago said.
“While headline inflation continues to ease in much of the world, core inflation remains sticky and high. Both advanced and emerging economies are likely to see modest economic growth this year, despite better-than-expected outcomes in 2023,” he said.
“In most countries, reaching inflation targets, reducing fiscal deficits and containing or lowering debt levels will stay as key policy priorities. Financing conditions are expected to remain tight.”
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