The rand has broken the R15/US$ ceiling on Wednesday after US Fed chair Janet Yellen surprised on Tuesday night with dovish comments, depreciating the dollar against most currencies.
“A need for caution is all it took from Janet Yellen in a speech last night to see the rand move back below R15,20,” said Umkhulu Consulting’s Adam Phillips.
By 10.15am, it was trading at R14,96/$.
Yellen highlighted the lower oil price and slower global growth, which “was all operators needed to push the dollar lower against the majors”.
“The chances of a hike in the US before the first [half] of 2016 has dropped to below 25% now,” according to TreasuryOne. “US treasury 10-year yields also dropped below 1,8% overnight. This has caused the dollar/rand to gain some momentum.”
Rand Merchant Bank analyst John Cairns said Yellen was “outright dovish in her comments yesterday, saying explicitly that the Fed would ‘proceed cautiously’ with rate hikes, while arguing that ‘it is too early to tell if this recent faster pace [of core inflation] will prove durable’.
“Market expectations of hikes have shifted back accordingly.”
The dollar remains the major risk for the rand, notably with the US payrolls data due on Friday, but local politics comes to the fore in the next two days, explained Cairns.
Concern the rand will remain at R15/$ comes as finance minister Pravin Gordhan is expected to reply to the Hawks on Wednesday regarding the alleged “rogue unit” in Sars.
“More importantly, the constitutional court has said that it will hand down its ruling on the Nkandla matter tomorrow, probably opening up the way for opposition parties to step up their calls for the president’s removal from office,” said Cairns.
Phillips said “all eyes will be on the con court on Thursday with regards to a decision on Nkandla”.
These events could change the rand/dollar story as the currency has proved politically volatile this year, analysts said.