The rand has benefitted from dollar weakness in recent sessions as slower-than-expected US inflation data eased pressure on the Federal Reserve to aggressively raise interest rates.
While US inflation remains elevated, and well above the 2% target set by the Fed, the market was pleasantly surprised by a lower-than-expected annual rise in consumer prices during July, said financial services firm, Citadel.
True to the volatile nature of the recent trading environment, investors moved swiftly to reposition themselves for a less aggressive US Federal Reserve . Inflation is still well above the 2% target, although the Fed will, in all likelihood, not be fully against an inflation rate of near the 4% mark, as this will assist the US in diminishing its debt burden in real terms.
“Another key factor that needs to be taken into consideration, is the fact that the US labour market remains robust, with the US seeing near full employment, even as the country enters a technical recession. These factors will make it slightly harder to reign in demand to counter inflation,” said Botes.
Meanwhile, manufacturing production in South Africa declined by 3.5% year-on-year, after a downwardly revised 1.8% fall in the previous month, and a sharper decline than market forecasts of a 2.9%. The decline marks the third consecutive month of contraction in manufacturing activity, largely attributed to load shedding.