The rand backtracked on Wednesday after firming to R15,50 to the greenback after finance minister Pravin Gordhan spoke for the first time about weekend reports of his imminent arrest.
The local unit, which was hard hit by the reports, ticked stronger as the rumours ran out of steam, but lost ground again as the country’s political squabbles continued in parliament, said NKC African Economics.
Gordhan’s statement late on Tuesday boosted the currency but a stronger dollar weighed down emerging market currencies, including the rand.
By 8.15am on Wednesday, the local unit breached its recent lows to trade 1% weaker at R15,70/US$ from a close of R15,53 in New York.
“Since its New York close, the local unit slowly moved up throughout the night as US consumer prices released last night posted the highest levels in three years. Although the US session did not see much movement in the major currency, we have seen a move to a stronger dollar across the board in the Far East session.
“The CPI data and various Fed members’ statements that rates could still move up in June have led to the US dollar becoming well supported this morning,” said treasury consultant Adam Phillips in his daily report.
He said the move could be clearly seen in the euro, which is below $1,13 for the first time since late April. The bets on a US rate hike have however only gone up from 4% to 12% for June.
Phillips said along with the local scenario, the overnight strength in the dollar should see the rand push lower into the R15,70s. NKC’s expected range for the day is between R15,50 and R15,80.
The market is expected to keep a close watch on consumer inflation and retail sales data out later on Wednesday, ahead of the Reserve Bank’s decision on interest rates on Thursday.