Rand wilts on Fed’s surprise hawkish signals
Fed surprises by signalling an earlier-than-expected increase in its interest rates
The rand suffered with other higher-yielding currencies after the US Federal Reserve (Fed) surprised many markets by signalling an earlier-than-expected increase in its interest rates, which may starve countries such as SA of capital.
Still, higher commodity prices should limit the damage while the Reserve Bank is likely to refrain from hiking rates, because weak consumer demand will constrain inflation and keep it comfortably within its target range, enabling it to keep supporting the economy with a record low repo rate. Sustained weakness in the currency increases the risk that price increases will accelerate by making imports such as oil and commodities priced in international markets more expensive...