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Rand falls as dollar rises after hawkish Fed minutes

08 April 2022 - 08:27 By Olivia Kumwenda-Mtambo and Rachel Savage and Promit Mukherjee
"The rand weakened... on both the hawkish tone from the Fed, underscored particularly in the minutes, and the recent softening of a number of commodity prices, including coal, SA's top commodity export," Investec's Annabel Bishop said in a note.
"The rand weakened... on both the hawkish tone from the Fed, underscored particularly in the minutes, and the recent softening of a number of commodity prices, including coal, SA's top commodity export," Investec's Annabel Bishop said in a note.
Image: Freddy Mavunda

The rand fell on Thursday, struggling against a stronger dollar after meeting minutes showed the US Federal Reserve preparing to move aggressively to head off inflation.

At 1526 GMT, the rand traded at around 14.7774 against the dollar, 0.78% weaker than its previous close.

Many Fed officials said they were prepared to raise interest rates in half-percentage-point increments in coming policy meetings to tame inflation, according to the minutes released on Wednesday.

Hawkish Fed comments tend to weigh on the rand, because higher rates in developed markets drain capital from higher-yielding but riskier emerging markets such as SA.

“The rand weakened... on both the hawkish tone from the Fed, underscored particularly in the minutes, and the recent softening of a number of commodity prices, including coal, SA's top commodity export,” Investec's Annabel Bishop said in a note.

“A more rapid US interest rate hike cycle than in SA will be particular cause for rand weakness, and the rand has also weakened on this concern.”

Shares on the JSE fell for the fourth consecutive day as investors struggled with uncertainty around the affect of the Russia-Ukraine crisis on commodities, amid a lack of local growth triggers.

This uncertainty both locally and globally has pushed the market into a “choppy patch” and has confused investors, said Greg Davies, head of wealth at Cratos Capital, which has led to days of “mini bull markets” or continued yet gradual fall.

“The situation in Ukraine vacillates between possible peace and more aggression almost on an hourly basis... And also locally, it's tough to pick up a theme,” he said.

The benchmark all-share index fell 0.47% to 74,008 points and the blue-chip index of top 40 companies ended down 0.45% to 67,003 points.

In fixed income, the yield on the benchmark 2030 government bond fell 4 basis points to 9.555%.

Reuters

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