South African rand recovers slightly but still down 2% over the week

JOHANNESBURG, January 28 (Reuters)The South African rand rallied slightly early on Friday as the dollar fell, but was on track for weekly losses of 2% after the country’s central bank signaled a gradual pace of policy tightening and expectations rose for aggressive rate hikes in the United States.

On Thursday, the South African Reserve Bank (SARB) raised its main policy rate in a “measured” move that it said should tame inflation risks.

At 06:43 GMT, the rand ZAR=D3 was trading at 15.4350 against the dollar, about 0.4% higher than its previous close. The dollar .DXY was down about 0.1% against a basket of currencies.

The rand fell around 1% on Thursday, after the SARB’s repo rate hiked 25 basis points ZAREPO=ICE consistent with economists’ expectations.

“The accompanying forward guidance was a little less hawkish than what the market had positioned itself for. Not only did one of the five members of the monetary policy committee vote for an unchanged rate, but the repo rate forecast of the bank for the next two years have been revised downwards,” ETM Analytics said in a research note.

“Heading into the weekend, the rand is likely to trade at the mercy of the dollar and general market sentiment.”

Later Friday, South Africa will auction inflation-linked bonds and treasury bills. December budget figures ZABUDM=ECI are expected around 12:00 GMT.

The government’s 2030 benchmark bond ZAR2030= was a little firmer in early trades, with the yield falling 1.5 basis points to 9.32%.

(Reporting by Alexander Winning; Editing by Shailesh Kuber)

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