JOHANNESBURG – South Africa’s rand firmed early on Friday after the Federal Reserve kept interest rates on hold.
The rand had weakened as much as 1% in the run-up to the decision, with market opinion divided on whether the U.S. central bank would raise rates for the first time since 2006.
By 11:26 the unit had gained 1.17% to 13.1792, with renewed appetite for emerging market assets lifting the currencies of economies considered to be risky investments.
“Overall, the latest FOMC statement from the Fed as well as Yellen’s own comments at her press conference can be considered relatively dovish,” said Kevin Lings, chief economist at Stanlib.
The Fed said economic and financial developments globally could restrain economic activity in the U.S., putting further downward pressure on inflation in the near term.
However, the bank could still raise rates before year-end, with 13 of 17 Fed policymakers expecting it a hike this year.
South Africa’s central bank decides on rates next week when its three-day policy conference concludes on Wednesday.
It lifted interest rates by 25 basis points to 6.00 percent in a borderline call in August, citing the rand’s vulnerability to global market reaction to monetary policy normalisation in the U.S.