The South African (SA) Rand softened in early trade on Friday as markets digested the Central bank’s interest rate hike, while growing expectations that the Federal Reserve will keep interest rates elevated weighed on the risk-sensitive currency.
The Rand traded at 16.40 against the Dollar, about 0.3% down from its previous close.
The SA Reserve Bank raised its key interest rate by 25 basis points to 7.25%, saying the Iran war had triggered “large and sustained” price shocks and that tighter policy was needed to prevent higher inflation from becoming entrenched
Governor Lesetja Kganyago said it was crucial for inflation to return to the central bank’s 3% target as recent fuel price pressures fade
As a net fuel importer, SA is heavily exposed to swings in global energy prices
The Dollar was set for its first back-to-back weekly gains in more than three months, as surging Treasury yields and mounting bets on further Federal’s rate hikes kept the greenback near multi-month peaks.
Next week, domestic investors will track a raft of month-end economic data, including money supply, private sector credit, trade balance and budget balance, as well as producer inflation and second-quarter formal sector employment figures
SA’s benchmark 2035 government bond was steady in early deals, with the yield unchanged at 8.72%.
–Reuters–
