Rand records 1% growth as emerging markets strengthen

The rand has strengthened 1% compared with Thursday’s JSE closing price and is trading at R16, 45 to the dollar in Asia this morning.

This follows the strengthening of other emerging markets’ currencies, despite the fact that the dollar is still trading at its strongest level in 20 years and close to parity with the euro.

The dollar’s continued strength is surprising, as the US economy is now in recession after gross domestic product contracted by 0.9% in the second quarter, following a contraction of 1.6% in the first quarter.

The reason for the stronger rand can be found in investors anticipating a slow-down in the Federal Reserve’s interest rate hiking pace.

Potentially slower and lower interest rate hikes in the US in contrast to quicker and higher interest rates by the South African Reserve Bank could lead to foreign currency inflows, strengthening the rand.

Rising interest rates in South Africa also cause the yield on government bonds to rise, making the rand more attractive versus the dollar.

In the video below from Monday, July 25, 2022, SABC News Economics Editor Tshepo Mongoa shares more on the local currency’s performance:

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Source: SABC News (sabcnews.com)