Rand pummelled as dollar hits 20-year high

The rand weakened on Thursday as the dollar hit a two-decade high after US data showed a strong economy, raising more expectations of higher interest rates from the Federal Reserve.

At 6.39pm, the rand traded at R17.29/US$, 0.93% weaker than its previous close.

Analysts are expecting that the US Federal Reserve will hike interest rates by 75 basis points at its next meeting later this month on the back of strong local economic data.

This is not only creating pressure on currencies of advanced markets, but forcing investors to flee to the safe haven US from riskier markets such as South Africa.

“The South African rand is suffering at the hands of declining global risk sentiment on the back of a hawkish Federal Reserve,” said Warren Venketas, analyst at forex trading firm IG.

The local currency has lost almost 16% against the dollar in the last five months from its peak of R14.46 against the dollar at the start of April. The weakening has also been led by cooling off in commodity prices.  — Promit Mukherjee and Bhargav Acharya, (c) 2022 Reuters