South African Rand Trades Sideways Ahead of SARB Rate Decision
South African rand is trading sideways against the US dollar, the Euro and the British pound on Wednesday ahead of the South African Reserve Bank (SARB) decision on the policy rate.
The rand was trading at R16.19 per dollar as investors shifted focus to the local inflation print and the SARB’s monetary policy decision, with the market pricing in a 25 basis-point (bps) rate hike, First National Bank (FNB) said in a brief.
Traders continue to monitor ongoing negotiations between the US and Iran regarding the reopening of the Strait of Hormuz. Against other crosses the rand is trading at R21.55 per pound and R18.50 per euro, the Bank said.
Brent crude fell to $98.20 today, extending its losses as progress in US-Iran discussions and efforts to restore Saudi export capacity ease supply concerns.
Markets were encouraged by signals of potential diplomacy, including possible reopening of the Strait of Hormuz, while Saudi Arabia continued work to resume exports through its key East-West pipeline.
The bullion advanced to $4,345 per ounce this morning as market participants continue to digest the hawkish comments from Federal Reserve officials which reinforced expectations of further US interest rate hikes.
While declining oil prices and easing Middle East tensions helped temper inflation concerns, strong Chinese demand and ongoing central bank purchases continue to provide longer-term support for the precious metal.The
SARB Monetary Policy Committee (MPC) meets today against a backdrop of heightened market expectations for a 25-basis-point (bp) rate hike to 7.25%.
The case for a hike has strengthened since the central bank’s unchanged stance in July, amid persistent energy price pressures.
Brent crude has sustained trade above $100 per barrel and recent monetary policy tightening by other major global central banks offers a cue. Just last week, the United States Federal Reserve raised its policy rate by 25 bps for the first time in three years.
The SARB’s interest rate announcement will also coincide with the August consumer price index (CPI) data, which is projected to show headline inflation accelerating toward 4.6% due to compounding increases in domestic fuel prices.
Analysts said a rate hike decision would enable the SARB to protect real interest rates and anchor long-term inflation expectations, which remain above the SARB’s 3% objective, against second-round fuel effects. South Africa 10-Year Bond Yield Edges Higher to 8.83%
