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The rand started the week on its back yesterday, weakening to Rand 14.78 against the dollar as risk aversion returned to markets due to weak economic growth in China.
That was a long way off for the rand as it strengthened sharply on Friday, closing the day 1.2% firmer at R14.59 as the dollar softened slightly and risk sentiment improved.
The Chinese economy grew less than expected in the third quarter, growing 4.9% year-on-year compared to 7.9% in the previous quarter.
This is the slowest pace of expansion since the third quarter of last year due to headwinds caused by power shortages, supply chain bottlenecks and a lingering real estate bubble .
TreasuryONE currency strategist Andre Cilliers said weak Chinese growth and weak industrial production led to a pullback in emerging market currencies.
âA return above the R14.70 level for the rand will open a larger correction to R14.80,â Cilliers said.
However, the rand managed to make gains later in the day, hovering around R14.68 against the greenback, as risk aversion eased somewhat, with an increased likelihood of the downside. of the United States be postponed to December.
Investec chief economist Annabel Bishop said the rand will remain volatile due to shrinking sentiment, global inflation and the likelihood of an interest rate hike in South Africa.
The Reserve Bank of SA has given a strong indication of a rate hike in the fourth quarter after consecutive quarters of rate hiatus as inflation is on the rise.
Headline consumer inflation for September is expected to show 5.1% year-on-year on high food and fuel inflation, down from 4.9% in August.
Bishop said the continued rise in the price of oil, in particular, was also causing short-term concerns, which would push inflation up in November.
The most recent update on movements in fuel price components shows an increase in oil prices of around R1 per liter for South Africa due to recent high oil price movements.
“Markets will always keep a watchful eye on US economic data releases, and the rand may weaken, particularly given signs of marked strength in US labor market data as expectations have shifted. started to go from a November to a shrinking December, âBishop said.