Finance

Rand extends recovery as dollar falters on Donald Trump’s comments

Rand extends recovery as dollar falters on Donald Trump’s comments

The statement comes after a report that Trump complained about Federal Reserve Chair Jerome Powell and the central bank's recent interest-rate hikes during a fundraiser in Southampton, New York, on Friday.

Keeping global trade conflict concerns on the boil, Trump said in an interview with Reuters on Monday that China was manipulating the yuan to make up for having to pay tariffs imposed by Washington on some imports from China.

When Trump was asked if he believed in the Fed's independence, he refused to say yes, telling the reporter: "I believe in the Fed doing what's good for the country". The benchmark rate is now in a range of 1.75 per cent to 2 per cent, and the Fed has indicated it is likely to hikes rates two more times before the end of the year.

The minutes also gave an indication the Fed was preparing to debate once again how best to implement its monetary policy, including what to do with its swollen balance sheet. "I'm not thrilled", Trump said in an interview with Reuters.

The U.S. unemployment rate is now 3.9 percent, well below what the Fed deems full employment, and bank officials have gradually increased their rate hike forecasts through 2018.

The Fed has raised rates twice this year and is expected to do so again next month.

The US dollar index, which measures the greenback against a basket of six major currencies, is down 0.19% to 95.55. The president publicly questioned the interest-rate hikes in July.

Investec economist Annabel Bishop said in a note that the Bank could strike a more hawkish tone during its scheduled meeting in September, meaning that it could flag potential increases in rates in future meetings, given the volatility in the rand.

Fed officials also generally expected the economy would grow at a fast enough rate to put upward pressure on inflation, which recently has come close to the central bank's target.

"Most Fed-watchers are of the view that Powell is emphasising the need for financial stability and with a positive United States economic backdrop is obliged to tighten policy".

Last November, Trump nominated Powell as Fed Chairman to replace Janet Yellen when her term expired in February.

"Am I happy with my choice?"

"I'm very concerned, especially given this very divisive and highly politicised environment, that bringing the Fed into that environment could complicate the Fed's communications [to the public], its support in the Congress and among the American people", said Donald L Kohn, who spent 40 years at the Fed and retired as its vice chairman in 2010. Trump told Reuters, referencing Powell.

Powell took over as Fed chief earlier this year. "I'll let you know in seven years".


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