Rand firmer despite slowdown worries, stocks slide

The South African rand strengthened on Tuesday, as the dollar consolidated gains near a two-decade peak amid fears that aggressive interest rate hikes by the Federal Reserve would push the U.S. economy into recession.

At 17:59, the rand traded at 16.0525 against the dollar, 0.48% stronger than its previous close.

The dollar index, which measures the greenback against a basket of six major peers, was up around 0.2% at 105.39.

BNP Paribas senior economist Jeff Schultz said in a note that the South African Reserve Bank was expected to maintain a 50 basis points pace of hikes for its three remaining meetings in 2022, followed by a final 25 bp hike in January 2023.

“We also would not rule out a 75 bp hike in either July or September in the event of more acute ZAR weakness,” Schultz added.

On the stock market, local indexes lost over 1% as investors continued to worry about an aggressive rate hike from the Federal Reserve on Wednesday. The broader all-share index slipped to an eight-month low.

Read:
Telkom slides almost 10% on ‘flat’ full-year earnings
The pandemic broke the Fed’s model; this week may show how much

Telkom led the fallers, down 9.5% after the majority state-owned operator reported lower-than-expected free cash flow and cut its medium-term revenue and profit guidance.

Peter Takaendsa, head of equities at Mergence Investment Managers, said that the market was disappointed by Telkom’s cash generation, which missed the company’s guidance.

The government’s benchmark 2030 bond was stable at 10.390%.