Rand takes hit as US rate cut hopes fade

The US dollar was up slightly yesterday, close to its highest level in almost three months against a range of currencies. Earlier in the day, the rand and Namibian dollar broke through R19/US$ for the first time in two weeks after a string of robust US economic data and remarks from Federal Reserve chair Jerome Powell quashed speculation of early and steep US interest rate cuts, which supported the greenback.Traders are currently pricing in only a 16% chance of a cut in March, the CME FedWatch tool showed, compared with a 69% chance at the start of the year.They are also now pricing in around 115 basis points (bps) of cuts this year, compared with around 150 bps anticipated in early January.The dollar index, which measures the US currency against six others, rose 0.1% to 104.58, having touched 104.60 on Monday, its highest since 14 November.By lunchtime yesterday, the rand recovered to R18.95/US$ after hitting R19.08 earlier in the session. ‘Little incentive’"There seems little incentive for investors and corporates to offload any of their dollar holdings," said Chris Turner global head of markets at ING."There is also the looming China Lunar New Year holiday next week, which may make the market reluctant to carry short dollar positions in an uncertain geopolitical environment," he added.Some analysts still see a positive outlook for the greenback."The real debate is not if the Fed cuts a few weeks sooner or later, but if it cuts by less or more than the rest of the world over the next two years," said George Saravelos, global head of forex research at Deutsche Bank."We continue to see the risks skewed towards less Fed easing and therefore in favour of the US dollar," he added. – Fin24/Reuters

Rand takes hit as US rate cut hopes fade

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Rand takes hit as US rate cut hopes fade

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