The South African rand climbed today after the European Central Bank made an unexpected move by reducing its main interest rate.
The first monetary policy meeting of the European Central Bank under leadership of the new President Mario_Draghi provided a surprise as the key minimum bid rate was reduced by 25 basis points to 1.25 percent. The rand reacted positively to the news as lower interest rates reduces pressure on the frail economy of the European Union and makes currency of emerging economies more interesting to carry traders. Carry traders borrow money in developed nations with low interest rates and invest in economies with relatively high interest rates.
USD/ZAR dropped from 7.9780 to 7.8330 and EUR/ZAR dropped from 10.9995 to 10.8062 today as of 14:50 GMT.
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