The market was caught unaware as the rand weakened on Thursday after the SA Reserve Bank’s monetary policy committee cut interest rates by 50 basis points. The rand was bid at R8.1905 to the dollar from its previous close of R8.1200. The rand has adjusted weaker but it is difficult to work out the impact of the rate cut thereon in light of the US dollar that has also strengthened. Marcus said growth was now expected at 3.8 percent in 2013 from a previous forecast of 3.9 percent. Local importers are taking advantage of any strength in the rand, the local unit managing to trade as strongly as 8.0905 briefly on the back of what appeared to be considerable flows of dollars. At the same time the euro was very much range bound, so the scene was set for the good governor to provide us with the insight of their view of the local economy. MPC was cutting by 50 basis points came as a big surprise, however the rand did not come under the extent of the pressure as expected, touching briefly as high as 8.2290,we then saw local exporters supplying mounds dollars . The rand did not react to the rate cut as is normally expected but, at the same time a rumour in the EC that Spain was struggling to sell its bonds sent the euro crashing. The rand reacted and moved back up to 8.2000.
[box]SA Reserve Bank’s monetary policy committee cut interest rates by 50 basis points[/box]
Euro reacts to Finnish vote
EUR mood is slightly better after the Finnish Parliament has approved 109-73 the aid package for the Spanish banks, following yesterday’s German vote, thus clearing the path for Spain to get the first € 30 billion tranche, needed towards the end of the month. The cross has spiked the 1.2275 area soon after the announcement, retreating afterwards to the actual 1.2260/65 region, although still trading in red.
My gut feel was that the weakening was on the back of the euro move, rather than the rate announcement. The rand still yields a much better return than most currencies – so i still believe that offshore investment will still be in the interest of the various investors.
My trading range 8.07/8.27.