The rand was largely steady this morning, with direction likely to be driven by global market moves as investors speculate on the timing of policy tightening in the United States. On the domestic front, market players anticipated few ripples from the South African Reserve Bank’s interest rate decision on Thursday, where the benchmark repo rate will likely stay unchanged at 5.75%.
Domestically eyes will be on the SARB interest rate decision on Thursday. Given a more cautious Fed and inflation which has slowed into Q1 of 2015, against the backdrop of still sluggish growth the SARB will likely feel it has room to pause in the short term and the benchmark repo rate will likely stay unchanged at 5.75%. However, telling will be its interpretation of the rand’s heightened fragility and its outlook on administered prices and price inflation. The SARB does not want to appear too complacent in these conditions, with the rand in dire need of a more adequate interest rate buffer.
At 08:31, the rand was just 0.16% softer at R12.0300/$ compared with Friday’s close at the New York session. Government bonds edged higher, pulling the yield on debt due in 2026 half a basis point lower to 7.735%.
“Euro/dollar remains the main market driver, not just of global currencies but increasingly also of interest rates, as markets digest whether Fed (US Federal Reserve) tightening will be delayed because of the dollar’s remarkable gains,” RMB analyst John Cairns said.