South African rand softens as markets absorb central bank rate hike
- The rand traded at 16.40 against the dollar , about 0.3% down from its previous close
The South African rand weakened as markets processed the central bank's interest rate hike and anticipated further Federal Reserve rate increases, impacting the risk-sensitive currency.
- South African Reserve Bank's interest rate hike.
- Federal Reserve's elevated interest rate expectations.
- Upcoming South African economic data.
JOHANNESBURG: The South African rand softened in early trade on Friday as markets digested the central bank’s interest rate hike, while growing expectations that the Federal Reserve will keep interest rates elevated weighed on the risk-sensitive currency.
At 0610 GMT, the rand traded at 16.40 against the dollar , about 0.3% down from its previous close.
The South African Reserve Bank raised its key interest rate by 25 basis points to 7.25%, saying the Iran war had triggered “large and sustained” price shocks and that tighter policy was needed to prevent higher inflation from becoming entrenched
Governor Lesetja Kganyago said it was crucial for inflation to return to the central bank’s 3% target as recent fuel-price pressures fade
As a net fuel importer, South Africa is heavily exposed to swings in global energy prices
The dollar was set for its first back-to-back weekly gains in more than three months, as surging Treasury yields and mounting bets on further Fed’s rate hikes kept the greenback near multi-month peaks.
Next week, domestic investors will track a raft of month-end economic data, including money supply, private sector credit, trade balance and budget balance, as well as producer inflation and second-quarter formal sector employment figures
South Africa’s benchmark 2035 government bond was steady in early deals, with the yield unchanged at 8.72%.