Dollar advances on hawkish Fed governor undermines South African rand


The dollar strengthened on Friday as a Fed member made hawkish comments on the future path of interest rates in the United States, while the South African rand fell.

At 16:02 GMT, the rand was trading at 18.1275 to the dollar, down around 0.42% from the previous close.

The Dollar Index (which measures the value of the dollar in relation to six other currencies) was up 0.65% at 101.63.

Federal Reserve Governor Christopher Waller said that, despite being in a rate-hiking cycle, the US central bank has made little headway toward its 2% inflation target, and hence would need to raise interest rates further.

According to analysts, investors are factoring in the possibility that the Fed would need to lower interest rates later this year owing to an expected downturn.

“They’re going to have to start reducing rates eventually as the economy slows down,” says David Shapiro, an equities analyst at Sasfin, “regardless of what these Fed governors say.”

In the lack of significant local economic data, global variables such as US monetary policy, as well as other emerging market currencies, often serve as guidelines for the risk-sensitive rand.

South African investors will be waiting for inflation figures for March next week to get a sense of the country’s economy.

On the Johannesburg Stock Exchange, the blue-chip Top-40 index and the all-share index both concluded the day higher.

The yield on the benchmark government bond for 2030 increased by 6 basis points to 9.945%.


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