Rand weakens in early trade as markets await Fed, ECB meetings

The rand lost 0.4% against the dollar on Tuesday morning, as emerging markets geared up for meetings by the US Federal Reserve Bank and the European Central Bank.

After losing 10 cents to the dollar in early trade, the rand firmed to trade evenly by 10:00. But it again weakened to trade at 13.22/$ at 11:12. 

At 14:02, it was trading at 13.17/$. 

Andre Botha, a senior currency dealer at TreasuryONE, said emerging markets were awaiting the outcomes of the meetings by the two central banks. 

"The market is pricing in a definite 25 basis point [0.25%] hike by the Fed this week, and there is speculation that the ECB will announce their strategy to taper their quantitative easing programme."

The two-day Fed meeting started on Tuesday. The ECB will hold its meeting on Thursday. 

"Most of the dust that was kicked up last week could be attributed to the attention that these two meetings have garnered," said Botha. "But with the US hike certainly priced in, attention will immediately shift to the statement after the release [of the Fed's decision] ."

He added that the "old story" of international trade disputes had again been pushed to the fore after acrimony at the recent G7 meeting in Quebec, Canada. 

The ‘tariff’ story gained new traction after President Trump did not waiver from ‘trade war’ talk at the G7 summit.

"While this has not caused a significant ripple in the market, the more prolonged and more fierce the rhetoric from Trump gets, the higher the chance that it will filter through to the markets," said Botha. 

Locally, investors will be looking at the results of the release of retail trade statistics on Wednesday, and mining production and sales figures on Thursday. 

According to NKC African Economics, the expected trading range for the local currency on Tuesday is R13.00/$ - R13.25/$.

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