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Rand slips as the US dollar finds footing

The rand slipped early on Monday, as the dollar found its footing on expectations for several US Federal Reserve interest rate hikes this year. Photographer: Nadine Hutton/Bloomberg

The rand slipped early on Monday, as the dollar found its footing on expectations for several US Federal Reserve interest rate hikes this year. Photographer: Nadine Hutton/Bloomberg

Published Jan 17, 2022

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The rand slipped early on Monday, as the dollar found its footing on expectations for several US Federal Reserve interest rate hikes this year.

At 0655 GMT, the rand traded at 15.4300 against the dollar, around 0.4 percent weaker than its previous close.

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"The global economy finds itself at the starting block of a new monetary tightening cycle, meaning US data, Fedspeak, and the narrative surrounding prospective Fed policy are the central drivers of global capital flows at the moment," analysts at ETM Analytics said in a research note.

In its January 25-26 meeting, the Fed is not expected to move rates, but there is a growing drumbeat of hawkish comments coming from within and outside the US central bank.

The rand started 2022 on a strong note, gaining more than 3 percent against the dollar year to date and making it one of the best-performing emerging market currencies.

Analysts at Investec say the rand typically enjoys a bout of seasonal strength around December to February, when most northern hemisphere traders are at work whereas the northern hemisphere summer months usually see less risk-taking.

This week South African economic data releases include November mining numbers on Tuesday, and December consumer inflation and November retail sales on Wednesday.

On January 27, the South African Reserve Bank will announce its first monetary policy decision of the year, with some traders expecting it to raise rates for the second meeting in a row after November.

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Government bonds were also slightly weaker in early deals, with the yield on the benchmark 2030 instrument rising 3.5 basis points to 9.405 percent.

REUTERS

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