The South African Rand was holding steady against the US Dollar on Thursday as economists digested the Federal Open Market Committee’s latest policy meeting minutes. The minutes were slightly more hawkish than expected in that they implied several policymakers are still pushing for a June interest rate increase. However, the minutes were taken before the sub-par US Non-Farm Payrolls report and also indicated that any rate adjustments would be data dependent.
Analysts with Standard Bank noted; ‘The minutes have reinforced the dovish tone set by the disappointing March payrolls numbers released last Friday, which improved risk appetite and lent support to emerging-market currencies throughout this week. The markets more dovish take on the Fed should not derail the Dollar. Instead, the Dollar is seen as merely resting before it moves higher again in anticipation of the start to policy normalisation.’
The Rand was later supported by the publication of encouraging domestic mining production data. Economists had anticipated a -1.1% month-on-month decline in mining production, but it actually surged by 3.8% on the month in February following a revised drop of -3.5% the previous month. On the year mining production rose from a revised -2.3% to 7.5% - defying predictions for a figure of -3.9%.
After the report was published the Pound Sterling to South African Rand (GBP/ZAR) exchange rate shed 0.4% to trade in the region of 17.5060 while the US Dollar to South African Rand currency pair was trading in the region of 11.8209 – unchanged from the day’s opening levels. In the hours ahead, South Africa’s Manufacturing Production report could prompt additional Rand movement. Manufacturing Production is believed to be up 1.05% on the month and 0.38% on the year. Economists with an interest in the Rand will also be looking to the week’s remaining US reports for guidance as a sudden string of positive US results would support the case for a summer rate hike and reduce demand for higher-risk or emerging-market assets.US reports to be aware of include the nation’s initial jobless/continuing claims figures and the nation’s monthly budget statement.