Rand extends gains after release of soft consumer spending numbers in US

The rand extended its gains on Friday afternoon, after consumer spending data in the US, a key measure of inflation, came in less than expected.

Locally, SA’s trade surplus of R5.94bn in August also comfortably beat forecasts of about R2.1bn, providing additional support for the local unit.

US personal consumption expenditure, a broad measure of household outlays on everything from groceries to doctor visits, rose 0.2% in August from a month earlier, and 1.4% year on year, reported Dow Jones Newswires.

A consensus forecast of economists polled by Bloomberg had been for a 0.3% month-on-month increase.

The rand had earlier staged a recovery after a volatile week in which it weakened to levels last seen in May. The dollar had gained against most emerging-market currencies earlier this week, with analysts attributing this to geopolitical risk, US President Donald Trump’s tax reforms and hawkish commentary from US Federal Reserve officials.

Fed chair Janet Yellen had indicated that it may not be prudent to wait for inflation in the US to reach 2% before again raising interest rates, which had increased expectations of a December hike.

Despite signs of economic growth in the US, stubbornly low inflation has offered the prospects of delaying the Fed’s planned cycle of increasing interest rates.

Concerns about inflation not progressing towards target were clearly increasing among some of the more dovish policy makers at the Fed, and another weak reading would not help matters, said Oanda analyst Craig Erlam.

At 3.30pm the rand was at R13.4561 to the dollar from R13.5153‚ at R15.919 to the euro from R15.9301 and at R18.0329 to the pound from R18.1654.

The euro was at $1.183 from $1.1787.

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