By Matthew le Cordeur
Cape Town â The rand has broken the R15/$ ceiling on Wednesday after US fed chair Janet Yellen surprised on Tuesday night with dovish comments, depreciating the dollar against most currencies.
âA need for caution is all it took from Janet Yellen in a speech last night to see the rand move back below 15.20,â said Umkhulu Consultingâs Adam Phillips.
By 10:15, it was trading at R14.96.
Yellen highlighted the lower oil price and slower global growth, which âwas all operators needed to push the dollar lower against the majorsâ.
âThe chances of a hike in the US before the first (half) of 2016 has dropped to below 25% now,â according to TreasuryOne. âUS treasury 10Y yields also dropped below 1.80% overnight. This has caused the dollar/rand to gain some momentum ….â
RMB analyst John Cairns said Yellen was âoutright dovish in her comments yesterday, saying explicitly that the Fed would âproceed cautiouslyâ with rate hikes, while arguing that âit is too early to tell if this recent faster pace [of core inflation] will prove durableâ.
âMarket expectations of hikes have shifted back accordingly.â
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 ârogue unitâ in Sars.
âMore 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 presidentâs removal from office,â said Cairns.
Phillips said âall eyes will be on the Concourt on Thursday with regards to a decision on Nkandlaâ.
These events could change the rand/dollar story as the currency has proved politically volatile this year, analysts said. –Â Fin24