Rand weakens as US Fed interest-rate fears mount
The rand was slightly weaker against the dollar on Tuesday just before midday as market fears mounted ahead of the US Feds’s policy meeting on Wednesday.
Last week, markets put a 30% probability of an interest-rate increase by the Fed, but as the day draws closer, this has flared-up to just more than 60%.
TreasuryOne dealer Andre Botha said the increase was most likely driven by inflation in the US looking better last week. The US consumer price index rose by 0.4% month on month in August, with the gain attributed to a sharp increase in fuel prices caused by Hurricane Harvey.
Botha said so-called risk-currencies [emerging-market currencies] have been seen to weaken leading up to the interest-rate decision, with the rand losing 1% on Monday, as risk-currencies fell back due to the Fed hike probability increasing.
The South African Reserve Bank is expected to announce its interest-rate decision on Thursday with the general market expectation being a 25 basis points rate cut.
At 11.31am, the rand was at R13.3127 to the dollar from R13.3079‚ at R15.9616 to the euro from R15.9101, and at R17.9718 to the pound from R17.9644.
The euro was at $1.1989 from $1.1955.