South Africa’s rand steadied against the dollar early on Tuesday, though the unit hovered near its weakest levels in nearly five months amid an elevated greenback and an imminent interest rate hike by the US Federal Reserve.
At 0620 GMT, the rand traded at R16.08 against the dollar, largely flat from its close on Monday. The rand had hit R16.19 on Monday, its weakest since December 15.
“The local unit has come under significant pressure, exacerbated by a lack of liquidity during the session yesterday, which saw it relinquish all of the previous session’s gains and more,” Nedbank analysts wrote in a note.
Traders said focus this week is on the US central bank’s Federal Open Market Committee, which will begin its meeting on interest rates later in the day and is expected to hike borrowing costs by half-a-percentage point when it announces its decision on Wednesday.
“Monetary tightening decisions are currently a balancing act between combating historically high inflation and not triggering an economic recession,” said Bianca Botes, director at Citadel Global.
In fixed income, the yield on the benchmark 2030 government bond was up 4 basis points to 9.995%.