JOHANNESBURG, Jan 17 (Reuters) – The South African rand slipped on Monday, as the dollar edged higher amid expectations for several U.S. Federal Reserve interest rate hikes this year.
At 1502 GMT, the rand traded at 15.4150 against the dollar, around 0.3% weaker than its previous close. The dollar was up less than 0.1% (.DXY) against a basket of currencies.
The Fed is not expected to move rates at its Jan. 25-26 meeting, but there is a growing drumbeat of hawkish comments coming from within and outside the U.S. central bank. read more
“As the Fed embarks on a new monetary tightening cycle, investors will gradually turn more judicious over where they invest their capital, and South Africa’s fiscal, political and structural shortcomings will be magnified,” analysts at ETM Analytics said in a research note.
The rand has started 2022 on a strong note, gaining more than 3% against the dollar and making it one of the best-performing emerging market currencies.
Analysts at Investec say the rand typically enjoys a bout of seasonal strength around December to February, when most northern hemisphere traders are at work whereas the northern hemisphere summer months usually see less risk-taking.
But further out there are worries over South Africa’s reform momentum, the long-term health of its public finances and infighting in the governing African National Congress party in a year in which it will hold a leadership contest.
This week’s economic data releases include November mining numbers (ZAMNG=ECI) on Tuesday, and December consumer inflation (ZACPIY=ECI) and November retail sales (ZARET=ECI) on Wednesday.
On Jan. 27, the South African Reserve Bank will announce its first monetary policy decision of the year, with some traders expecting it to raise rates for the second meeting in a row after a November hike (ZAREPO=ECI). read more
Shares on the Johannesburg Stock Exchange (JSE) rose on the back of a surprise move by China’s central bank to ease policy by cutting rates on medium-term loans.
This triggered a boost to the South African commodities and technology shares which are index heavyweights and linked to the Chinese economy.
The resources index (.RESI), which represents mining companies especially gold and platinum group metals, rose 0.35% while technology firm Naspers Ltd , which holds through a subsidiary up to 29% stake in Chinese internet giant Tencent Holdings (0700.HK), gained 0.47%.
Overall, the benchmark all-share index (.JALSH) ended up 0.58% and the blue-chip index of top 40 companies (.JTOPI) closed 0.64% higher.