South African rand notes in a file photo. Picture: REUTERS/Siphiwe Sibeko
South African rand notes in a file photo. Picture: REUTERS/Siphiwe Sibeko

The rand was slightly softer against major global currencies on Tuesday afternoon, with global focus remaining fixed on the dollar, as investors await further signals that the US Federal Reserve will move more aggressively to tighten monetary policy.

The relative economic strength of the US compared to that of the eurozone has seen the dollar reach three-month highs against the euro this week. A rising oil price, which earlier climbed above $75 a barrel for the first time since 2014, has also stoked inflation fears.

On Tuesday afternoon, the euro was flat against the greenback. Earlier, data showed business sentiment in the eurozone’s three leading economies slid in April.

"The greenback rally may have paused, but looks to push higher as US rate remains elevated and US data shows steady growth," BK Asset Management MD Boris Schlossberg said.

The stronger dollar has also followed a spike in US Treasury yields.

All this could mean that the rand was in for some volatility along with other emerging-market currencies, but in the medium-term the local unit would continue to find support from carry trade, TreasuryOne currency dealer Andre Botha said.

Carry trade refers to a strategy of borrowing money in low interest-rate environments in order to invest in assets that offer the prospect of a higher return.

At 3pm, the rand was at R12.3770 to the dollar from R12.3568, R15.1016 to the euro from R15.0815 and at R17.2695 to the pound from R17.2251.

The euro was at $1.2201, from $1.2207.

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