This week has been a good start for the rand as it was trading at around R18.35 on Monday against the dollar.
The rand has had the strongest week against the dollar since January and this was based on strong optimism that the US interest rate would be cut.
This has been dashed by a number of US government officials who said on Friday that the US will keep interest rates unchanged for now.
Chicago Fed president Austan Goolsbee and Minneapolis Fed president Neel Kashkari said on Friday that US interest rates were on hold until the Federal Reserve got more data that showed the rate of inflation was slowing, according to CNBC.
On Tuesday, despite these setbacks, the rand still showed strength against the dollar and was trading at around R18.37 to the dollar at 9am.
The rand was trading at around R23.10 to the pound and around R19.86 to the euro at 9am.
The US’ decision to keep their interest rates unchanged could put pressure on the rand, as investors favour the dollar yields versus more risky emerging market currencies, according to James Paynter, the head market analyst at Dynamic Outcomes.
What could impact the rand this week?
Paynter said on Monday that the rand has had three weeks of gains and said that there a few “potential triggers” that could impact the rand's strength against the dollar and other currencies.
He said that the release of South Africa’s unemployment and retail sales figures could impact the rand. Paynter also noted that the US’ retail sales figures and the UK’s unemployment figures could impact the rand’s strength against global currencies.
The analyst also said the May 29 elections will most certainly play a role in the rand volatility over the coming weeks.
“Overall, we do not expect a quiet week, in fact, expect continued and increasing volatility in the markets as we head closer to the the elections,” he concluded.
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