The rand has gained strength against the global currencies this week and was trading well below the R18 mark on Tuesday morning.
The ZAR gained some ground against the US dollar on Monday and traded at around R17,61 at the close of business.
As South Africans await the Reserve Bank’s decision on the interest rate this week, the rand seems to have maintained its prowess against the dollar on Tuesday.
The rand was trading at around R17,60 against the dollar at 9am.
The ZAR was trading at around R19.60 to the euro and R23.28 to the pound at 9am.
Kavir Surujhlal, a sales trader at IG Group told Reuters that the main reason for the rand’s strength has been a weak dollar.
“A weaker greenback is primarily driving the renewed strength in the rand today," Surujhlal noted.
Repo rate impact
Surujhlal also added that investors could see increased volatility in the rand leading up to the US and SA interest rates announcements.
The US Federal Reserve will make its interest rate decision on Wednesday and it is expected that Americans can expect a 50 basis points (bps) cut, according to Old Mutual.
South Africans can expect to know if the interest rate will change on Thursday.
The repo rate is currently at a 14-year high of 8.25% and the prime lending rate is 11.75%.
If the Reserve Bank announces a 25bps cut, the the repo rate will fall to 8% while the prime lending rate in the country will drop to 11.50%.
Absa’s SA macroeconomics team said on Monday that they were expecting a 25bps cut.
"Our view is line with the Thomson Reuters consensus, with 18 of the 21 analysts (including Absa Research) polled last week calling for a 25bps cut while the remaining 3 expecting no change,“ Absa said.
“We believe that the case for a cut has strengthened since the July Monetary Policy Committee when the committee voted 4:2 (with 2 supporting a 25bps cut) in favour of a hold,” the bank added.
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