Rand powers to firmest in almost 18 months against euro

The rand notched up a six-week high against the dollar.

FILE: The rand powered to its firmest in nearly 18 months against the euro on Thursday. Picture: Gadeeja Abbas/EWN.

JOHANNESBURG - The rand powered to its firmest in nearly 18 months against the euro on Thursday and notched up a six-week high against the dollar after the European Central Bank unveiled a 60 billion euro-a-month asset purchase programme to boost growth.

The rand strengthened more than 1 percent against the greenback to 11.3900 at 1545 GMT, breaching a resistance level around the 11.40 mark that had started to build up over the last two months.

It recorded even stronger gains versus the single European currency, jumping around 2.5 percent to 13.0623, a level not seen since September 2013.

Domestic government bonds also rallied sharply, with the yield on the benchmark 2026 instrument shedding 6 basis points to 7.275 percent, its lowest since May 2013.

With fuel prices plunging, South African inflation has been slowing and dropped more than expected to 5.3 percent year-on-year in December, suggesting a rate-tightening cycle in Africa's most sophisticated economy may be on hold.

Some economists had even started to speculate whether the Central Bank may have room to cut rates at its first policy meeting of the year next week, although Governor Lesetja Kganyago put paid to that thinking.

Speaking to Reuters at the World Economic Forum in Davos, Kganyago said the bank would wait to see the second round effects of the sharp drop in oil prices before policy responded.