The rand has strengthened by nearly two percent last week against a basket of major currencies and has been the best performing emerging markets currency so far this year.
This is mainly due to the expectation that the Reserve Bank will raise interest rates by another 25 basis points on Thursday after Consumer price inflation for December came in at 5.9 percent.
This is close to the Bank’s upper limit of its target range of CPI of 3-to-6 percent. The rand is also supported by the World Bank’s approval of a $750-million low-interest rate loan to help South Africa recover from the COVID-19 pandemic.
An inflow of foreign currency strengthens the rand, while an outflow weakens it. The rand is trading at R15.08 to the dollar in early Asian trade, but it was strong as R13.50 to the dollar in June last year.
