The rand held steady over the long weekend, opening at R14.37 on Tuesday morning following the public holiday on Monday.

The local currency was trading at R14.38 to the greenback by 11:23.

The rand had weakened slightly during Friday’s session following the announcement by President Cyril Ramaphosa of a stimulus package meant to reignite economic growth.

This suggested some skepticism by the markets regarding the proposed reprioritisation of funds necessary for the plan, according to Nema Ramkhelawan-Bhana, head of global market research at RMB.

Ramkhewlawan-Bhana said a number of global developments this week may pose a risk for the rand and other emerging market currencies. These include ongoing US-China trade tensions, a possible 25 basis point interest rate hike by the US Federal Reserve Bank, a rise in the Brent Crude oil price above $80 per barrel, and fear of a no-deal Brexit scenario. 

Fed hike

In a market update Andre Botha, senior dealer at TreasuryONE, said it is likely that the market had priced in another hike by the US Fed. The fed will make the announcement on Wednesday at about 20:00 South African time. Its current benchmark interest rate is 2% and a 25bps hike would push it to 2.25%.

“The key though would be the conference that would accompany the decision, as to whether the market could gauge the ‘feeling’ of the Fed," said Botha. “Should the Fed sound more hawkish than expected we could see the US dollar retracing some of its losses and emerging markets on the defensive but for the most part we expect limited movement after the hike."

According to the CME Group’s FedWatch, traders expect a 100% rate hike on Wednesday and an 83% probability for another hike by year end, said FXTM’s chief market strategist Hussein Sayed.

Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions also noted the Fed’s interest rate announcement as one of the factors which will have a bearing on the markets this week.

“With markets positioning for a US rate hike, one can expect the rand to come under pressure. A range of R14.20 to R14.60 is back in play,” said Botes.