The rand has continued to trade at its strongest level in over a month this Thursday morning. This after having strengthened by around 1.5% against a basket of major currencies the day before.
The rand is trading close to R18 to the US dollar, compared to close to R20 to the dollar at the beginning of June.
The rand’s new found strength is mainly due to a better than expected consumer price inflation rate in the United States of 3% in June.
This may be a sign that the Federal Reserve is close to the end of its present interest rate hiking cycle, as inflation nears its target range of 2%.
Better than expected inflation data has weakened the dollar, as can be seen in a drop in the yield for treasury bonds.
A weaker dollar strengthens emerging markets currencies, such as the rand, and increases the price of commodities.
Gold
The price of gold has strengthened to a one month high of around $1 960 in midday Asian trade.
This after US inflation data re-ignited hopes that the Federal Reserve may soon stop raising interest rates.
The consumer price inflation rate also came in better than expected for June at 3%.
This has weakened the dollar, as is evidenced in a drop in the yield of U.S. treasuries.
A lower yield for treasuries and lower interest rates make gold once again more attractive as a safe haven investment during times of political and financial uncertainties.
Gold traded as high as $2 072 at the beginning of May.
Brent crude oil
Meanwhile, the price of Brent crude oil rose by nearly 2% during yesterday’s trading session, hovering at its highest price in over two months.
This as investors welcomed signs of cooling inflation in the U.S. which could see the Federal Reserve getting close to the end of its interest rate hiking cycle.
This could see recession fears receding, or at least revive hopes for a soft landing for the world’s biggest economy, and therefore increasing demand for oil.
At the same time, optimism that Chinese authorities will unveil further measures to boost economic growth and signs that Russian crude output is starting to decrease is supporting the oil market.
Brent crude is trading at $80.50 in midday Asian trade and two hours before the opening of the JSE.
