Rand weakens as Fed minutes lack surprise

In early trade the rand was at at R15.77 against the dollar, 0.25% weaker than its previous close.
Image: Waldo Swiegers / Bloomberg

Rand weakened against the dollar in early trade on Thursday, as minutes from the US Federal Reserve’s most recent meeting signalled that the central bank was likely to stay the course on interest rate hikes.

Minutes from the Fed’s early May meeting showed a majority of participants backing half-percentage-point rate hikes in June and July.

At 0608 GMT, the rand traded at R15.77 against the dollar, 0.25% weaker than its previous close.

The dollar index edged 0.1% higher to 102.15, as a decline in Asian equities fostered demand for safe havens like the greenback.

“While the minutes reiterated that the Fed would likely implement two 50-bp rate hikes in June and July, they also confirmed that it was considering a potential policy pause thereafter to assess the effects of aggressive policy tightening,” ETM Analytics said in a research note.

“There were thus no major surprises in the minutes, which explains the USD’s consolidation after an initial bump higher.”

At 0930 GMT on Thursday, the statistics agency will release April producer inflation figures, providing further clues about price pressures in Africa’s most industrialised nation.

Analysts polled by Reuters have predicted that April producer inflation will rise to 12.3% in annual terms from 11.9% in March.

The government’s benchmark 2030 bond was stable in early deals, with the yield at 9.75%.

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