South African rand falls as dollar rises on Fed rate hike projections

south african rand falls on fed rate hike expectations
south african rand falls on fed rate hike expectations

On Friday, the South African rand fell even further as the dollar rose in value in response to the Federal Reserve’s persistent musings about the necessity for further interest rate hikes.

The rand was trading at 17.0275 to the dollar at 15:29 GMT, a decrease of 0.89% from the previous close.

As the dollar has strengthened on global markets, the rand has lost more than 5% of its value this week.

While debating how quickly and how high to raise them, a number of U.S. central bank officials agreed on Thursday that the Fed has to keep boosting borrowing costs to reduce decades-high inflation.

This week, the South African currency has been hit hard by a number of factors, including a decline in local retail sales that came as a surprise in June and power outages caused by the faltering state-owned power firm Eskom.

“The rand and other emerging market currencies remain very exposed to fluctuations in global market sentiment,” said Investec analyst Lara Hodes in a research note.

Consumer and producer price indexes for July, unemployment rates for the second quarter, and a leading business cycle indicator are just some of the local data releases scheduled for the coming week.

Similar to the global equity market, the JSE saw a decline in share prices as concerns about a rate hike and the prospect of a recession dampened investors’ willingness to take risks.

The JSE’s Top-40 index lost 1.89% at the market’s close, and the All-Share index fell 1.82%.

The benchmark 2030 bond issued by the South African government dropped in price, resulting in a 14 basis point increase in yield to 10.325%.

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