South Africa’s rand weakened early on Tuesday, with investors opting to take profits on the currency’s recent rally ahead of a lending rates decision later in the week.
At 0645 GMT the rand ZAR=D3 was 0.28% weaker at 15.3500 per dollar, compared with an overnight close of 15.3075 in New York, halting a three-session rally that carried the unit back near an eight-month best it hit last week.
The rand, along with other emerging market currencies, has benefited from the risk-on sentiment spurred by Joe Biden’s win in the United States presidential elections last week. Promising news of another COVID-19 vaccine has also boosted risk demand. a rates decision due on Thursday and likely credit reviews by ratings agencies Standard & Poors and Moody’s has dampened some of the enthusiasm.
The small chance of a rate cut, which would chip away at the returns investors earn on local assets, has prompted some investors to pocket profits on the rand’s 5% rally since the beginning of November.
The South African Reserve Bank (SARB) is likely to leave the repo rate at a record low at its Nov. 19 meeting and over the coming year, too, a Reuters poll of economists found. 22 economists surveyed, 17 expect Reserve Bank Governor Lesetja Kganyago to hold rates steady at 3.5%. The remaining five analysts forecast a 25-basis-point cut.