Cape Town – The rand fell by 20c against the dollar between Tuesday and Wednesday, after the Turkish lira’s poor performance affected all emerging market currencies and the US Federal Reserve became hawkish.
The lira fell after the country's recent downgrade to junk credit status and the rand moved down in “sympathy” with other emerging market currencies, according to Umkhulu Consulting analyst Adam Phillips on Wednesday.
Other factors forcing the rand from R13.60/$ to R13.80/$ was the “growing realisation that a US hike is likely in December”.
By 09:20 on Wednesday, the rand was at R13.78.
“Also providing further evidence was the largest one day fall in gold since September 2013,” said Phillips. “The concerns around the US hike saw some good selling, but it also appears that the European Central Bank (ECB) will start tapering down its €80bn bond purchasing." However, this report was denied by the ECB media officer.
RMB analyst John Cairns on Wednesday questioned whether the ECB could be set to “taper” its asset purchase programme. “That seems highly unlikely to us, but just the rumour was enough to send global yields higher late yesterday.
“Add some hawkish Fed talk and the USD/ZAR has been dragged higher,” he said. “We do not, however, think either story justifies much concern so expect USD/ZAR to ease back today.
“The evening session also saw a report come out from the International Monetary Fund reporting on weak global growth,” Phillips said. “They highlighted concerns of stagnation driven by worries over trade and immigration that would hurt productivity.”