The rand has had a good start to the week and is trading below R17.40 against the dollar on the heels of the interest rate cut by the South African Reserve Bank.
The rand made some major gains against global currencies on Monday morning and continues to grow after the South African Reserve Bank (SARB) decided to cut the interest rate by 25 basis points.
Last week, the ZAR broke through the R17.60 mark against the dollar to reach its best levels since July 2023. To place this into context, the rand was trading at around R19.30 in February 2024.
The rand was trading at around R17.39 against the dollar at 8.30am on Monday.
The ZAR was trading at around R19.43 against the euro and around R23.19 against the pound.
Andre Cilliers, currency strategist at TreasuryONE told Reuters that the rand will be below the R18 mark this week.
"The rand is likely to remain within a R17.40 to R17.70 range in the short term as it tracks international moves but we could see further profit-taking, given the rand's recent strong run," Cilliers noted.
Interest rate cut
SARB’s Monetary Policy Committee (MPC) decided to cut the interest rate by 25bps last Thursday, and will fall from 8.25% to 8%.
This means the prime lending rate has dropped from 11.75% to 11.50%.
The repo rate had been on a 14-year high before this cut by the MPC.
The Reserve Bank Governor, Lesetja Kganyago said in discussing the stance, MPC members considered an unchanged stance, a 25bps, and a 50bps cut.
“The MPC ultimately reached consensus on 25 basis points, agreeing that a less restrictive stance was consistent with sustainably lower inflation over the medium term,” he said.
On inflation, South Africa’s headline eased to 4.4% in August, a three-year low, and close to the middle of our target range.
“Our forecast suggests this progress will be sustained, with inflation contained below the 4.5% midpoint of our range through to the end of the forecast horizon, in 2026," Kganyago added.
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