“The dollar retreat is particularly interesting given the widespread expectation that the Fed is set to lift rates,” said Nico du Plessis, analyst at Mercato Financial Services “Not only does this give us some insight into just how much has been priced in, but it also highlights the possibility that the Fed might reach the pause button, given the growing number of headwinds becoming more prominent with each passing month.”
The headwinds include the higher stock market volatility and the still unresolved US-China trade dispute and its potential effect on the broader US economy.
The uncertain global environment has recently led to wild swings in the rand, which is highly sensitive to shifts in global sentiment.
Investors have, in the recent past, showed signs of angst over the health of the global economy, leading to a big sell-off in risky assets, most notably equities.
Foreigners dumped nearly R11bn worth of local bonds over the past week, according to the JSE’s weekly data. Foreigners hold the biggest share of local bonds at about 40%, rendering the country vulnerable to capital outflows when global sentiment takes a knock.
At 2.51pm, the rand was 0.65% stronger against the dollar at R14.3075, 0.33% better against the euro at R16.2842, and 0.11% better against the pound at R18.1443. The euro was 0.37% better against the dollar at $1.1382.
Local bonds had improved, with the yield on the benchmark R186 dropping to 9.11%, from 9.19% at its last settlement.