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Rand trades below R17 to dollar, ahead of Sarb meet

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South Africa’s rand firmed over night to trade below R17 to the US dollar on Thursday morning – its strongest level since late August.

The local currency was trading at R16.93 at around 6:00, buoyed by news out of the US that the Federal Reserve may taper its interest rate hikes.

Now, the focus locally will be on South African Reserve Bank (Sarb) governor Lesetja Kganyago’s repo rate announcement on Thursday afternoon.

It remains to be seen whether the Sarb’s Monetary Policy Committee (MPC) will be slayed in any way by sentiments out of the US Federal Open Market Committee’s minutes from it November meeting.

The release of the minutes late on Thursday night (SA time), saw the dollar weaken against the rand and other emerging market currencies, as the Fed signalled possible slower rate hikes. The Fed also flagged concerns around the US going into a recession – sentiments that some market commentators and economists see as another indication of the Fed wanting to temper the hiking cycle.

On the local front, however, SA’s latest headline inflation number came in higher for October on Wednesday. This is likely to add pressure on the Sarb to be more conservative or hawkish in its sentiments and repo rate decision.

Following the release of October’s CPI, most local economists and market watchers have reiterated their call that the Sarb will have no option but to hike the repo rate sharply by another 75 basis points on Thursday.

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