UPDATE: Volatile first week for rand, breaches R14/$ mark
The rand continued its choppy trade into 2019, breaking below the R14/$ mark and weakening as much as R14.69 to the greenback in just the first week of the year.
In a market report published on Friday afternoon, Investec Chief Economist Annabel Bishop, highlighted the local currency's movements over the first few trade sessions of the year.
The rand which opened at R14.29/$ on Friday morning, had firmed as much as 1% against the dollar to R14.16/$ - its best level since mid-December, Fin24 reported.
The day's trade ranged from R14.09/$ to R14.35/$.
Shortly after South African markets closed on Friday, the local currency gained more than 2% to trade at R13.97/$ by 17:30.
"The rand cheered today a equity markets gained," Bishop said. She explained that the "volatility and sensitivity" to global financial markets will likely remain a key theme for the local currency in 2019.
Similarly, Corporate Treasury Manager of Peregrine Treasury Solutions Bianca Botes explained in a market update earlier on Friday that the volatility in the currency over the past two days signals the volatility which can be expected for the rest of the year.
"The high volatility signals the sensitivity of the rand to bad news, especially from a global economic perspective and the emerging market basket. Global growth concerns are continuously adding pressure to the local unit but the rand remains resilient," she said.
US interest hikes
Bishop explained further that the "market cheer" locally can be attributed to expectations that there may be less interest rate hikes delivered in the US, than previously feared. This would be "particularly positive" for emerging market currencies, she said.
Bishop explained that the US Federal Reserve Bank is expected to take cues from US economic data to drive interest rate decisions.
"The US signalled two to three 25bp rate hikes in 2019 at its December 2018 FOMC (Federal Open Market Committee) meeting, as it indicated its continued commitment to move to a perceived neutral interest rate.
"However, the Fed also affirmed that its future interest rate decisions would continue to be economic, and other data, dependent," she added.
Earlier on Friday US non-farm payroll data was released – having increased to 312 000, better than the expected 184 000. Further, hourly earnings ticked up to 3.2% compared to the expected 3%. The rand weakened slightly, before recovering to R14.10/$.
"Events in the US will remain a determining factor for the rand, contributing to the ongoing capriciousness of the local exchange rate."
*UPDATE: This article was updated at 17:40 to reflect that the currency had breached the R14/$ mark after markets closed.