The Rand has fallen to a four year low against the dollar. It fell more than 1,2% against the dollar on Thursday. This drop is highly unlikely to create a cut back on rates and taxes, which will be seen when the South African Reserve Bank ends it third policy meeting later today. The Rand is currently standing at 9,6980 to the dollar – the lowest it has been in the last four years.

Currency strategist at Rand Merchant Bank, John Cairns said:

It’s a reflection of Ben Bernanke’s comments yesterday.

The dollar strengthened significantly and risky assets have come under a lot of pressure and the Rand didn’t fully reflect that in overnight trade.

Analysts from Brown Brothers Harriman sent a note to clients:

The Rand is being buffeted by usual concerns about labor unrest, sluggish growth and poor economic fundamentals.

The Federal Reserve chairman warns the bank could be stepping down on its bond purchases. The South African Reserve Bank is not expected to change the current 5% repo rate.

Mamokete Lijane, an analyst at Absa Bank said:

The rhetoric from this week’s meeting will be crucial as it would shed light on how the SARB views the balance between weaker global and domestic growth dynamics and upside risks to [the consumer price index] presented by the weaker currency.

[Source: IOL News, Wall Street Journal]