Rand strengthens against dollar

FEBRUARY 20, 2015

The rand made further gains against the dollar at midday on Thursday after the greenback weakened as the US Federal Reserve took on a more dovish view in minutes released on Wednesday.

Barclays Research said in a note that the January Federal open market committee minutes indicated that concern about downside risk to inflation had risen and‚ consequently‚ the bar for hiking rates by June was higher than it was in December.

“We maintain our baseline forecast for a June rate hike at this juncture‚ but the risk of a later takeoff has risen‚ particularly if downside surprises on core inflation continue.”

At 11.28am the rand was at R11,5636 to the dollar from the previous close of R11,5887. It earlier strengthened to R11,5380.

Against the euro the rand was at R13,2155 from a previous close of R13,2119. Against the pound the local currency was at R17,8633 from R17,8889.

The euro was at $1,1434 from a previous close of $1,1399.

Rand Merchant Bank currency analyst John Cairns said the Fed minutes and talk of a Greek deal had brought such much-needed relief to global markets. The rand reacted positively‚ backing off from earlier weaker levels of R11.72 to the dollar.

“Expect sideways moves from R11.58 (to the dollar) given the limited event risk on the day.”

Markets are watching further developments in the Greek debt negotiations. Greece has said it will formally request a six-month loan extension on Thursday. Germany and other Euro zone members insist that no deal is on the table and that the country must abide by conditions in the current programme.

RMB said if a deal was reached‚ it would be forthcoming at Friday’s Euro zone finance ministers’ meeting.

The European Central Bank increased the cap on its lending to the Greek central bank. The increase was less than expected and should keep Greek banks afloat for only another week. -iNet Bridge