By: Bianca Botes, Corporate Treasury Management, Peregrine Treasury Solutions
The Monetary Policy Committee (MPC) opted to keep the repo rate unchanged at the MPC meeting. This means that the 25 basis point cut that was widely expected by financial markets failed to materialise.
This has led to the rand strengthening slightly: it was trading at 13.26 to the US dollar after the announcement, from a high of 13.40 this morning.
We expect the market to continue seeing pressure on the rand as well as other emerging market currencies as the US Federal Reserve Bank put potential rate hikes back on the table this morning which could reduce the carry trade that we are seeing from other countries. However, for the time being, the rand is taking the news rather well and we can expect to see foreign funds continuing to flow into the country as a result of the higher yield capabilities that emerging markets have to offer.