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The rand hits its best level in two weeks on the back of a weaker dollar

by , 07 October 2015

Today, the rand clawed back over 1% to trade to its best levels in two weeks. The currency is gaining on the back of a weaker greenback.

The dollar is under pressure as traders bet against interest rates rising this year in the US.

Let's take a closer look at what's going on…

A weaker dollar is good news for the rand

The rand rallied against the dollar today thanks to dollar weakness, says Fin24. After much speculation, traders are now betting against the US Federal Reserve hiking interest rates this year.

This also led to stocks on the JSE performing better today, adds Fin24.

By mid-afternoon, the rand was trading at R13.3550 to the dollar, reports the SABC. This is “its firmest level since 21 September”.

Look at the chart below of the rand against the dollar over the past year…

Chart of the dollar rand

The dollar weakens on the back of disappointing news

Warrick Butler, a trader with Standard Bank, said that with “disappointing jobs data from the US” on Friday, riskier emerging market assets are looking appealing,” says BDLive. This has given the rand a slight reprieve.

And news out that the trade deficit in the US “widened by its most in five months in August,” also fuelled speculation that the Fed will push out hiking rates, adds BDLive.

NKC African Economics said a rally in emerging markets has led to the rand staging “somewhat of a comeback,” notes Fin24. But they warn this could be “temporary as a 2015 rate hike from [the] US Fed is still on [the] table”.

Mark Loubser, a fund manager with Independent Securities, warned that “markets are very volatile and they react to the upside quite quickly,” adds the SABC. Another possible delay by the Fed has put a positive slant on the markets.

At time of writing, the rand was trading at R13.45 to the dollar, R15.12 to the euro and R20.60 to the pound.

For the rand’s sake, a weaker dollar is more favourable at the moment.

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The rand hits its best level in two weeks on the back of a weaker dollar
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