Rand gains as dollar falls after Fed meeting

South Africa’s rand firmed on Thursday, recouping some of its overnight losses as the dollar fell on growing concerns that US policymakers may keep raising interest rates just as the world’s biggest economy faces a slowdown.

Stocks ended lower as Shoprite dipped more than 3% after the Competition Commission recommended that the company’s retail unit be fined 10% of its turnover for anti-competitive behaviour.

At 1511 GMT, the rand traded at R 14.23 versus the dollar, 1.08% stronger than its previous close.

With little domestic data and tepid market activity, the currency is tracking global trends this week.

On Wednesday, the US central bank’s “dot plots” of rate-path projections signalled two hikes next year, down from three previously. A slower path of monetary policy tightening in the world’s largest economy should relieve some pressure on emerging market currencies such as the rand.

A weaker dollar on the day also supported the rand as it recovered from its losses in the aftermath of the Fed hike, when it weakened to R14.43.

The currency touched a week best of R14.11 on Wednesday ahead of the US interest rates decision.

“The rand is again trading above the R14.20 level, and the outlook for emerging markets and riskier assets is currently ultimately bearish. The Fed maintains its outlook of a consistent hiking path, although at a more sedate pace,” Nedbank analysts said in a note.

Government bonds also firmed, with the yield on the benchmark instrument due in 2026 dipping by 5 basis points to 9%.

On the bourse, the Top-40 index fell 0.41% to R45,35 while the broader all-share ended 0.43% lower at R51,34.

Shoprite closed 3.10% lower as its retail unit Shoprite Checkers faced a hefty fine for anti-competitive behaviour. The case centres on Shoprite Checkers’ event ticket-selling subsidiary, Computicket, which was also charged and fined 10% of turnover.