Rand recovers slightly ahead of US consumer spending numbers

The rand brushed off earlier losses to the dollar on Thursday afternoon to strengthen, along with other emerging-market currencies, as the dollar took a breather from its recent rally.

The local unit reached an intra-day worst of R13.71 to the dollar, a level not seen since May, but analysts said some recovery could be expected.

The rand has been on the back foot since Monday, following hawkish comments from US Federal Reserve officials, which have increased prospects of an interest-rate increase later this year. Signs that US President Donald Trump may successfully push through promised tax cuts boosted the dollar’s rise.

Geopolitical tension has weighed on risk currencies of late, while analysts said local political uncertainty had not helped matters.

Some pullback from this weakness could be expected ahead of the weekend, but focus would also be on data due on Friday, said Rand Merchant Bank analyst John Cairns.

Friday sees the release of US personal consumption expenditure (PCE)‚ a key measure of inflation there. A higher-than-expected core PCE inflation figure would send markets spiralling‚ said Cairns.

In terms of local data, the producer price index for final manufactured goods‚ regarded as the headline figure‚ earlier came in at 4.2% from a year earlier. PPI accelerated from a 3.6% increase in July‚ Statistics SA said on Thursday, slightly higher than a Trading Economics forecast of 4.1%.

The outlooks for both producer and consumer inflation were still favourable, with both expected to be below the Reserve Bank’s upper target range for the remainder of the year, said Nedbank group economic unit analysts. However, rand volatility ahead of the ANC’s elective conference in December would cut the chances of an early reduction.

At 3pm‚ the rand was at R13.5586 to the dollar from R13.5906‚ at R15.9567 to the euro from R15.9626 and at R18.1859 to the pound from R18.1940.

The euro was at $1.1768 from $1.1745.

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