Rand rallies as Fed pushes back on 75-basis-point hike

The rand jumped more than 2% against the dollar on Wednesday, with global stocks also rallying, after the US Federal Reserve played down the chances of 75-basis-point interest rate hikes in coming months.

The Fed on Wednesday delivered a 50-basis-point hike as expected, with its announcement about tapering bond buybacks also within expectations. “That policy certainty was music to investors’ ears,” said SPI Asset Management managing partner Stephen Innes in a note.

Markets had been concerned that US inflation, which jumped to 8.5% in March, would prompt an aggressive response from the world’s most influential central bank. That US inflation rate was the highest in over four decades, and more than four times the Fed’s 2% target.

Though the Fed has said two more 50-basis-point hikes are on the cards for the next meetings, risk assets rallied in response, with US markets having their best day since May 2020, while the rand had its best day since August of that year.

The rand jumped 2.09% to R14.546/$ on Wednesday, its best level in over a week, with the local currency also rising about 1% against both the pound and the euro.

In morning trade the local currency was flat at R15.458/$ and at R16.402/€, and had gained 0.36% to R19.445/£.

Asian markets were also positive, with the Shanghai Composite adding 1.11% and the Hang Seng 0.58%.

Tencent, which influences the JSE via the Naspers stable, had gained 0.16%.

Gold was up 1.04% to $1,901.02/oz, while platinum had gained 0.63% to $1,000.51/oz, its best level in about six weeks.

Brent crude had gained 0.11% to $110.19 a barrel, having risen almost 4% on Wednesday.

Locally, load-shedding is expected to continue until Monday.

Landlord Dipula Income Fund, whose portfolio includes offices, retail and industrial buildings, is due to release its results for the six months to end-February later, but has not released a trading update, implying its earnings have not moved in a range of more than 20%.

S&P Global is due to release its purchasing managers index for SA later, with this gauge of activity across the economy having risen to a four-month high of 51.4 points in March. Any reading above 50 indicates expansion.

gernetzkyk@businesslive.co.za