Picture: 123RF/UFUK ZIVANA
Picture: 123RF/UFUK ZIVANA

The rand was at its weakest level against dollar in about a year on Wednesday morning as the expectation of higher interest rates in the US and the embattled Turkish lira kept the local currency under pressure.

The rand was within a touching distance of R16/$, from R14.91/$ two weeks ago, reflecting the effect of the expected changes in US monetary policy that are likely to divert capital away from high-yielding, but risky emerging-market currencies.

The weakening currency, which has the potential to stoke inflation because it increases the cost of imported goods, is likely to pose a challenge for the Reserve Bank, whose monetary committee last week raised interest rates by 25 basis points, the first increase in three years.

The local currency changed hands to the dollar at R15.84/$ in early trade, down just 0.18%. Meanwhile, Brent crude was marginally higher at $82.37 a barrel, a day after jumping nearly 4% in its biggest one-day gain since late August.

The big jump in international oil prices came despite the US, China, India and several other countries announcing the release of strategic reserves in an attempt to cool reduce prices. Brent crude, which has risen 60% since the start of 2021, has contributed to a surge in global inflation, which has forced policymakers in developed markets in particular to tighten policy.

“These countries have vast reserves but they are intended for emergencies, not to start price wars with producers every time they get a little high,” said Craig Erlam, senior market analyst at Oanda.

“The question now is how Opec+ will respond as the group can easily wipe out any benefits of the releases by slowing their planned monthly output increases. This isn’t what the White House wants, which may explain why the estimates look a little on the low end.”

Elsewhere, Asian equities were mostly lower, taking their lead from Wall Street, which finished lower on Tuesday. The JSE could follow suit, though a weaker rand could buoy big rand-hedge industrial and mining stocks.

The Turkish lira hovered at a record low against the dollar, after its central bank cut rates, despite surging inflation. The pressure mainly came from the Turkish government.

mahlangua@businesslive.co.za

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